Adjusted Basis refers to the net cost of an asset after adjusting for various factors such as improvements, depreciation, and damage, and is primarily used for calculating capital gains or losses upon the sale of the asset.
Appreciation refers to the increase in the value of a property over time, driven by various factors including inflation, demand pressures, physical additions, and improvements. Appreciation can significantly impact investment returns and tax obligations.
A collapsible corporation refers to a specific type of corporation that is dissolved typically within three years, with the IRS treating any gain from the sale or liquidation as ordinary income rather than capital gain for the stockholders.
Cost basis refers to the original value of a property for tax purposes, adjusted over time for improvements, deprecation, and other related factors. This concept is fundamental in real estate transactions for determining capital gains or losses upon the sale of the property.
Depreciation recapture refers to the process of collecting income tax on gains made through the sale of depreciable property, where deductions for accelerated depreciation exceed via recapture in accordance with Section 1250 of the Internal Revenue Code.
Excess accelerated depreciation refers to the accumulated difference between accelerated depreciation claimed for tax purposes and what straight-line depreciation would have been. It's typically recaptured as ordinary income upon sale instead of receiving more favorable capital gains treatment.
Home sale tax, governed under Section 121 of the Internal Revenue Code, involves tax exclusions for gains when selling a primary residence under specific conditions.
Imputed interest is the interest that tax authorities assume to be paid on a loan, even if no actual interest payment has been made or if the interest rate is below market levels.
The Internal Revenue Code (IRC) is a comprehensive set of tax laws enacted by the United States Congress to specify how various types of income are to be taxed and what deductions are allowed. It serves as the foundation for the country's federal tax laws and is critical in shaping tax policy and administration.
Assets considered to be of the same nature and character, even if they differ in quality or grade, which can be exchanged under Internal Revenue Code Section 1031 to defer capital gains taxes.
Portfolio income consists of earnings derived from various investment activities including interest, dividends, royalties, and capital gains from the sale of investment property. It differs from earned income and cannot be used to offset passive activity losses.
Proceeds from resale refer to the total amount of money received from selling a property, after accounting for any associated costs and expenses.
Recapture of depreciation is a tax provision where the IRS recovers depreciation deductions upon the sale of an asset, often leading to significant tax implications for the property owner.
Rollover Home Sale refers to the tax-deferred sale of a principal residence before May 6, 1997, which allowed homeowners to defer gains if they purchased a replacement home. It is governed by Section 121 for principal residence sales after this date.
Section 1231 of the Internal Revenue Code pertains to assets used in a trade or business. Gains on Section 1231 assets are generally taxed at capital gains rates, except for depreciation recapture, while losses are tax-deductible as ordinary income.
Section 1245 of the Internal Revenue Code (IRC) pertains to gains from the sale of depreciable personal property and mandates that depreciation recapture occurs, treating a portion of the capital gains as ordinary income.
Tax Basis, also known as Basis (Tax), refers to the original value of a property or asset for tax purposes, with potential adjustments over time reflecting improvements, depreciation, or other factors.
Trade or business property, as referenced in Section 1231, refers to property used in a trade or business activity that can provide tax benefits upon sale or exchange. Such properties are subject to specific tax regulations that can impact depreciation and capital gains treatment.
