Chapter 16A - Income Tax Issues in Real Estate Flashcards Preview

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Flashcards in Chapter 16A - Income Tax Issues in Real Estate Deck (15)
1

Active Income

Payment for services rendered - wages, salaries, commissions

2

Adjusted Basis

Original cost of property plus gains minus losses

3

Appreciation

Increase in value of asset over time

4

Basis

Price paid for the property, including any depreciation or investments

5

Boot

Third property in a like-kind exchange to make up for disparities between the two properties.

6

Capital Gain

Positive difference between what you sell a property for vs. what you originally paid for it

7

Capital Loss

Negative difference between what you sell a property for vs. what you originally paid for it.

8

Depreciation

Recovery of cost of a capital asset by expensing a set portion of it each year. Land is never depreciable, only improvements are.

9

Home Acquisition Debt

Mortgage taken out to buy, build, or improve home. Mortgage interest is tax deductible, as are discount points.

10

Home Equity Debt

Debt taken out with home as collateral - interest is fully deductible limited to home's market value less home acquisition debt or $100,000, whichever is less.

11

Passive Income

Taxpayer does not materially participate in income producing activity. EX: rental property

12

Portfolio Income

Earnings from interest, dividends, annuities, royalties, investment properties

13

Recaptured Depreciation

Occurs on personal asset used for business when asset is sold

14

Straight Line Depreciation

Assumes an equal amount of asset's price will be expensed each year of its useful life - 27 1/2 years for residential rental property, 39 years for nonresidential/commercial property.

15

Tax Deferred Exchange

Taxpayer can sell an investment property and purchase another in its place without paying taxes on proceeds from the sale - like-kind exchange structure as tax-deferred exchange where taxable gain is deferred until a later date.