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Ch. 17

Vocab: Federal Taxation of Home Ownership

TermDefinition
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
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