10 Questions
What are the two main types of real estate investments?
Appreciation and income
What is the maximum amount of capital gain that can be excluded from gains tax every two years for a married couple?
$500,000
What is calculated based on the difference between the sale price and the adjusted basis of the property?
Capital gains and losses
What is the potential of a real estate investment?
To generate an income
What is the potential of a real estate investment to provide a return on investment?
ROI
What is the potential of a real estate investment to provide a return on equity?
RCI
What is the potential of a real estate investment to provide a return on capital investment?
ROCI
What is the seller of a principal residence required to pay tax on?
Capital gain
What is the purpose of market variability in real estate investments?
To provide risks and returns
What is the purpose of calculating real estate depreciation?
To determine the tax laws in effect at the time the property is depreciated
Study Notes
- Real estate is an investment that can provide both risk and reward.
- Risks and returns associated with real estate investments come from market variability.
- There are two main types of real estate investments: those that are acquired for appreciation and those that are acquired for income.
- Real estate investments can offer both risk and reward, depending on the risks and returns that are inherent in market fluctuations.
- Real estate investments are taxed on their income and any gain or loss when sold.
- Capital gains and losses are calculated based on the difference between the sale price and the adjusted basis of the property.
- If the sale proceeds are more than the adjusted basis, the investor has a gain; if less, they have a loss.
- Real estate depreciation is calculated using a schedule or term determined by the tax laws in effect at the time the property is depreciated.
- The seller of a principal residence owes tax on capital gain that results from sale unless excluded.
- Capital gain is the amount realized minus the adjusted basis.
- Gains tax exclusion: up to $250,000 for a single seller and $500,000 for a married couple can be excluded from gains tax every two years.
- The text discusses an investment in real estate.
- The real estate investment has the potential to generate an income.
- The real estate investment has the potential to provide a return on investment.
- The real estate investment has the potential to provide a return on equity.
- The real estate investment has the potential to provide a return on investment (ROI).
- The real estate investment has the potential to provide a return on investment (RCI).
- The real estate investment has the potential to provide a return on investment (ROCI).
Test your knowledge on real estate investments, risks, and returns. Explore concepts such as market variability, types of real estate investments, taxation, capital gains, depreciation, and gains tax exclusion.
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