Term
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Definition
| The more a taxpayer earns in a given tax year, the higher his tax rate will be |
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Term
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Definition
| a specified amount subtracted from income before it is taxed |
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Term
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Definition
| An amount subtracted directly from the amount of tax owed |
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Term
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Definition
| A gain or loss on the sale of an asset held for personal use or as an investment. Capital gains and losses are netted against each other. |
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Term
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Definition
| The result of a sale or exchange of an asset (like real estate) |
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Term
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Definition
(Initial Basis) The amount of investment in a property.
What it cost to acquire the property.
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Definition
| The initial basis plus capital expenditures and minus allowable depreciation deductions |
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Definition
| Expenditures made to improve the property, such as a remodeled kitchen |
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Term
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Definition
| A gain or loss is realized when it is seperated from the asset (this generally occurs when it is sold) |
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Term
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Definition
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Term
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Definition
| A gain is said to be recognized in the year it is taxed. It is recognized the year it is realized unless it is deferred by tax code |
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Term
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Definition
| Main home, a taxpayer can only have one principal residence |
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Term
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Definition
| A second home or a vacation cabin, etc. |
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Term
| Unimproved investment property |
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Definition
| a vacant land that produces no rental income |
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Term
| Propert held for the production of income: |
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Definition
| residential, commercial, and industrial property that is used to generate rental income for the owner |
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Term
| Property used in a trade or business: |
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Definition
| Land and buildings the taxpayer owns and uses in trade or business |
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Term
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Definition
| property held primarily for sale to customers rather than for long-term investment, like subdivisions |
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Term
| Real estate transactions that are covered by non-recognition provisions (3): |
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Definition
1. Installment sales
2. Involuntary conversions
3. "Tax-free" exchanges |
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Term
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Definition
Difference between sales price and adjusted basis
Sales price - adjusted basis = gross profit |
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Term
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Definition
| Anything other than like-kind property that the taxpayer recieves in a 'tax-free' exchange. It is recognized the year of the exchange. |
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Term
Exclusion of gain from sale of principal residence:
(Amount) |
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Definition
| A taxpayer may exclude the entire gain on the sale of his principal residence, up to $250,000 if filing single, or $500,000 if married and filing a joint return |
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Term
Exclusion of Gain from the sale of the principal residence:
(Eligibility) |
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Definition
Seller must have both owned and used property as principal residence for at least 2 of the last 5 years before date of sale.
(Thus, exclusion available only once every 2 years) |
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Term
| Deductions for property owners (4): |
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Definition
1. Depreciation
2. Repairs
3. Real Property Taxes
4. Mortgage Interest |
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Term
| Depreciation deductions are AKA: |
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Definition
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Term
| Limits for mortgage interest deductions for personal residences (principal or second homes): |
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Definition
Can deduct interest payments on mortgage debt of up to $1 mil ($500,000 for married, filing seperately) used to buy, build, or improve 1st or 2nd residence.
Also, interest on a home equity loan of up to $100,000 ($50,000 married, filing sep.) can be deducted without regard to purpose of loan |
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Term
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Definition
| A sale in which less than 100% of sales price is received in the year of the sale |
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Term
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Definition
Deductions from the taxpayer's income to allow the cost of an asset to be recovered over a period of years, only allowed for property held for production of income or used in a trade or business.
AKA cost recovery deduction |
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Term
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Definition
| Money spent on improvements to property, which add to its value or prolong its economic life |
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Term
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Definition
| Not to be confused with capital expenditures, its money spent on repairs to keep property in ordinary, efficient, and operating condition |
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Term
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Definition
| In a tax-free exchange, property received that is of the same kind as the property transferred; any 2 peices of real estate are considered to be of like kind |
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