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Ch. 17
Vocab: Federal Taxation of Home Ownership
| Term | Definition |
|---|---|
| Acquisition Debt | The debt incurred in the purchase of a personal residence. Can be used similar to acquisition cost. |
| Adjusted Basis | The value of property used to determine the amount of gain or loss realized by the owner upon sale of the property; =Acquisition cost + Capital improvements - Depreciation (Acquisition cost= sales price + closing costs) |
| Amount Realized (Adjusted Sales Price) | =Sales price- any allowable selling expenses of the sale. The "net" sales price. |
| Basis | The value of property for income tax purposes. Adjusted basis= original acquisition cost (purchase price + allowable closing costs) + capital improvements - accrued depreciation. |
| Boot | The difference between the purchase price and the value of what is being exchanged that is paid in cash or other property. =Purchase price-value of property |
| Capital Gain | Profit made on the sale of real property. |
| Capital Improvement | An item that adds value to the property, adapts the property to new uses, or prolongs the life of property. Maintenance is not considered to be this type of improvement. |
| Capital Loss | Loss incurred on the sale of real property. |
| Costs of Acquisition | The allowable costs of acquiring real property that can be added to the purchase price to determine the basis. Basis= Allowable costs of acquiring property + Purchase price |
| Equity Debt | All debt secured by a qualified residence to the extent it does not exceed the fair market value of the residence reduced by the acquisition debt. Interest generated by the first $100,000 of home equity debt is deductible as mortgage interest. |
| Net Operating Income | = Gross operating income - Operating expenses |
| Installment Sale | A transaction in which the seller receives the purchase price in more than 1 payment. |
| Tax-Deductible Expense | Homeownership allows the deduction of mortgage interest (not principal) and property; this includes discount points for obtaining a purchase or refinance loan. |
| Acquisition Cost | The purchase + the closing costs incurred in purchasing the property. |
| Gain Realized | The excess of the amount realized over the adjusted basis. "net" sales price / value of property |
| Long Term Capital Gain | Profit made on the sale of real property where the asset was held for at lease 1 year. |
| Principal Residence | The home the owner or renter occupies most of the time. |
| Realized Gain | Actual profit resulting in a sale. |
| Short Term Capital Gain | Profit made from the sale of real property where title was held for less than 1 year. |
| Taxable Gain | The amount of profit or gain subject to tax =Recognized gain - Applicable exclusion amount (if any) |
Created by:
laurenk1996