Flashcards in Chapter 16A - Income Tax Issues in Real Estate Deck (15)
Payment for services rendered - wages, salaries, commissions
Original cost of property plus gains minus losses
Increase in value of asset over time
Price paid for the property, including any depreciation or investments
Third property in a like-kind exchange to make up for disparities between the two properties.
Positive difference between what you sell a property for vs. what you originally paid for it
Negative difference between what you sell a property for vs. what you originally paid for it.
Recovery of cost of a capital asset by expensing a set portion of it each year. Land is never depreciable, only improvements are.
Home Acquisition Debt
Mortgage taken out to buy, build, or improve home. Mortgage interest is tax deductible, as are discount points.
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.
Taxpayer does not materially participate in income producing activity. EX: rental property
Earnings from interest, dividends, annuities, royalties, investment properties
Occurs on personal asset used for business when asset is sold
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.