Who breaks up the settlement statement, bookkeeper or CPA?

Sorting it at closing is much easier than reconstructing it later, and the buckets are these.

Adding to basis means the cost becomes part of what you're treated as having paid for the property, and it gets recovered through depreciation over years instead of deducted now. Title and settlement fees and recording items typically land here. Basis then has to be split between land and building, because land isn't depreciated. People commonly use the county assessor's ratio of land to improvement value for that split, and whether that's acceptable for your return is a question for your tax preparer.

Loan costs like your $2,400 origination are usually treated separately from the property itself and recovered over the life of the loan rather than the life of the building. So they sit in their own asset account, not lumped into the building.

Prepaid interest is interest. The $1,100 escrow deposit is still your money sitting at the servicer, so it's an asset on your balance sheet, and it should get reconciled against the escrow statements you receive. The $780 tax proration credit reduces what you paid at closing and relates to taxes the seller owed, which is why it doesn't behave like income.

The division of labor most people land on is that the bookkeeper records each line to a sensible account at closing, and the tax preparer decides the classifications that affect the return. Whichever way it goes, ask for the depreciation schedule after the return is filed and make your fixed asset list agree with it. That single habit prevents most of the mess I see described in this room.

I built a closing checklist because I got tired of guessing. Every settlement statement line gets mapped to one of five destinations before I touch the ledger, and anything I can't map goes in a suspense account with the line description pasted in. The suspense account is the thing that saves you, because it's a visible open question instead of a wrong entry that looks finished.

The $780 credit is the one that would have got me. I'd have booked it as income because it came to me at closing, and reading @rena-guide's post I now see why that's wrong, since it's really the seller settling up for taxes on days they owned it. Does that mean when the full tax bill comes due later I deduct the whole thing including their portion?

@halyard the mechanism is that the proration adjusts what each party is treated as having paid, so the credit reduces your cost rather than showing up as income, and how it nets against the bill you eventually pay depends on the arrangement in your contract and on your preparer's treatment. Confirm it with them rather than with a forum.

@ledger the part of your question that matters more than the categorization is who owns the fixed asset register. On one property with $6,300 of closing items, either answer works and the numbers are small. At six properties across two entities, with a refinance and a partial roof replacement in the mix, the books and the return start drifting and nobody notices for three years. The usual failure looks like this. Your bookkeeper capitalizes the $2,400 origination into an account called loan costs. You refinance. The old unamortized balance should come off and it never does, so you carry two sets of loan costs and the balance sheet shows an asset that doesn't exist. Same story with the escrow asset, which nobody reconciles because the servicer statement arrives once a year and looks boring.

So pick one source of truth. The CPA's depreciation schedule is the practical choice, because it's what defends the return. Your job is to make the ledger agree with it every year and to flag anything on the schedule you don't recognize.

One more thing that bears on your land split. If you ever look at a cost segregation study, it works off the same purchase basis you're setting up now, and a sloppy allocation at closing means the study starts from a number you'll have to redo. That gets more expensive to fix than it was to get right.