Federal income taxation of real property ownership
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| adjusted basis | cost of any physical capital improvements that add value to the property or prolong its life (added to the cost basis)
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| basis | determines the amount of the gain realized from a sale of real property
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| boot | money or property given to make up any difference in value or equity between two properties in a 1031 exchange
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| capital gain | the taxable profit earned from the sale of real property
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| capital loss | a loss derived from the sale of real property that may be deductible from ordinary taxable income.
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| cost basis | the owner's initial cost for the real estate including closing expenses
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| depreciation | a loss of value in property due to any cause; an expense deduction for tax purposes taken over the period of ownership of income property
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| installment sale | A transaction in which the sales price is paid in two or more installments over two or more years. If the sale meets certain requirements, a taxpayer need only pay on funds received that year.
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| like-kind properties | a tax term used in exchanges; property may be exchanged for life in kind property and the tax postponed (does not refer to the physical similarity of the properties).
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| long-term capital gain | profits from assets owned longer than 12 months; taxed at a lower rate than ordinary income
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| short-term capital gain | profits from assets owned for 12 months or less
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| tax-deferred exchange | an IRS sanctioned method for real estate investors to defer taxation of capital gains by making a property exchange rather than by selling the investment property
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