Podcast
Questions and Answers
A real estate investor sells a property for $500,000 that they originally purchased for $400,000. What is the resulting profit classified as?
A real estate investor sells a property for $500,000 that they originally purchased for $400,000. What is the resulting profit classified as?
- Active Income
- Capital Gain (correct)
- Boot
- Tax Depreciation
Which accounting method recognizes revenues and expenses specifically when physical cash changes hands?
Which accounting method recognizes revenues and expenses specifically when physical cash changes hands?
- Active Income
- Basis (correct)
- Tax Depreciation
- Capital Gain
Which of the following best describes 'boot' in a real estate transaction?
Which of the following best describes 'boot' in a real estate transaction?
- Unlike property exchanged in a transaction (correct)
- The purchase price of a property when accounting for capital gains tax.
- The cost of improvements made to a property after its initial purchase.
- The value of services provided in lieu of monetary payment during a transaction.
How does tax depreciation primarily benefit a real estate investor?
How does tax depreciation primarily benefit a real estate investor?
How could the 'basis' of a property be relevant when determining capital gains after its sale?
How could the 'basis' of a property be relevant when determining capital gains after its sale?
A landlord receives rent payments monthly. Under the cash method of accounting, when are these rents recognized as income?
A landlord receives rent payments monthly. Under the cash method of accounting, when are these rents recognized as income?
Which scenario represents a situation where the concept of 'boot' would be most relevant?
Which scenario represents a situation where the concept of 'boot' would be most relevant?
What aspect of a rental property does tax depreciation primarily reflect?
What aspect of a rental property does tax depreciation primarily reflect?
An investor purchases a property for $300,000, spends $50,000 on improvements, and then sells it for $400,000. What is the capital gain, ignoring any selling expenses?
An investor purchases a property for $300,000, spends $50,000 on improvements, and then sells it for $400,000. What is the capital gain, ignoring any selling expenses?
How does 'active income' typically differ from capital gains income for a real estate professional?
How does 'active income' typically differ from capital gains income for a real estate professional?
Flashcards
What is Capital Gain?
What is Capital Gain?
The profit from a property sale where the sale price exceeds the purchase price.
What is Basis?
What is Basis?
An accounting method that recognizes revenues and expenses when cash changes hands.
Study Notes
- A profit from a property sale where the sale amount exceeds the purchase price is known as a capital gain
- The accounting method that recognizes revenues and expenses when physical cash is received or paid out is known as Basis
Studying That Suits You
Use AI to generate personalized quizzes and flashcards to suit your learning preferences.
Description
Explore the concepts of capital gains, which arise when a property is sold for more than its purchase price. Understand cash basis accounting, where revenues and expenses are recognized upon the exchange of physical cash.
