SECTION 11- TAXES

  1. Marginal Tax Rate
    Marginal Tax Rate is the tax rate that is applied to the next dollar of taxable earned income.
  2. Adjusted Cost Basis
    Adjusted Cost Basis; To determine your adjusted basis for an asset, start with the amount you originally paid, add your cost of improvements and assessments, then subtract deductions you have taken, such as depreciation and depletion.  An example of an adjusted cost basis would be the addition of a concrete patio on the personal residence [DO NOT factor in mortgage payments in this calculation.]
  3. Capital Expenditures
    - Capital Expenditures made for improvements to property are added to the Cost Basis of the property and then Depreciated.

    - If an income property loses value, the owner can deduct that loss
  4. Tax Deferred Exchange or 1031 Exchange
    Tax Deferred Exchange is often referred to as a 1031 Exchange, this type of exchange allows a deferment of taxes, but the properties exchanged must be of like in kind.

    - Boot Refers to Cash, or other dissimilar property that is utilized to balance out the equities of the properties being exchanged. [Receipt of Boot may result in a Recognized Gain.]

    - Absent any Boot being given or received, the Cost Basis of the old property being will be the same as Cost Basis of the new property being acquired.
  5. Sale- leaseback
    In a Sale-Leaseback the Seller becomes a Tenant, thus allowing the Seller to deduct all of his future rent payments as business expenditures.  In a Sale-Leaseback arrangement, the Buyer should not be concerned with the Seller’s Book Value.
  6. Capitalization Rate (owner's profit or rate of return)
    is used in appraising math to convert or change an income into a value (rents are income)
  7. Value
    is found by subtracting vacancy and credit losses and expenses from the gross income to get the net income and then dividing by a cap rate
  8. Expenses
    can be subtracted consist of fixed expenses( taxes and insurance) operating expenses (maintenance, management, legal, advertising) and reseves for replacements (Note; mortgage payments are not an expense)
Author
Cshowalter
ID
333276
Card Set
SECTION 11- TAXES
Description
SECTION 11- TAXES
Updated