E.41 Tax consequences of property transactions Flashcards

The profit from the sale of a capital asset, such as real estate or stocks, calculated as the difference between the selling price and the asset’s adjusted basis.

The loss incurred when a capital asset is sold for less than its adjusted basis, which may be used to offset capital gains for tax purposes.

The original purchase price of a property, plus improvements and certain costs, minus depreciation and other adjustments, used to determine taxable gain or loss.

A tax provision that requires taxpayers to pay ordinary income tax on previously deducted depreciation when selling depreciable property.

A tax-deferred exchange of real estate held for investment or business purposes, allowing capital gains taxes to be deferred if certain requirements are met.

A tax benefit that allows individuals to exclude up to $250,000 ($500,000 for married couples) of capital gains on the sale of a primary residence if ownership and use tests are met.

A method of selling property in which the seller receives payments over time and reports a portion of the gain each year, spreading out the tax liability.

The basis of property received as a gift is generally the donor’s adjusted basis, unless the fair market value at the time of the gift is lower and results in a loss.

The basis of inherited property is generally stepped up to its fair market value at the date of the decedent’s death, reducing capital gains when sold.

Taxed at higher rates and applies to assets held for one year or less.

Preferential tax treatment for assets held more than one year.