Chapter 17 - Investment and Business Brokerage Flashcards
Appreciation
An increase in value or worth.
Adjusted basis
Original cost plus improvements less depreciation.
Basis
The cost of a property that the Internal Revenue Service uses to determine annual depreciation and gain or loss on the sale of an asset.
Bill of sale
A written instrument given to transfer title to personal property.
Boot
Money or property given to make up any difference in value or equity between two properties.
bulk transfer act
Section of the uniform commercial code which regulates the transfer of personal property designed to protect creditors from the fraud perpetrated by a business owner who sells a business, including equipment, stock, and then disappears, leaving creditors unpaid.
Capital Gain
Profits realized from the sale of assets like real estate.
Cash flow
The object of income property is to generate spendable income. total amount of money remaining after all expenditures have been paid,including taxes,operating costs, and mortgage payments.
Depreciation
For income tax purposes, yearly write-off of a percentage of the cost of a building as an expense.
Exchange
A transaction in which all or part of the consideration for the purchase of real property is the transfer of like kind property (for example real estate for real estate). dealt with in section 1031 IRC.
Income property
Property held for producing income as well as for a profit on its sale.
Installment sale
Purchase price is paid over a period of years. Seller reports any profit on the transaction year by year as it is collected.
Leverage
The use of borrowed money to finance investments.
Marginal tax rate
The rate at which the investors’s top dollar is taxed.
Pyramiding
The practice by which the investors holding can be increased without investing additional capital.
Real estate investment syndicate
Joining together of two or more people or firms to carry out one or more business projects. not in itself a legal entity and may be organized into a number of ownership forms.
Real estate trust
REIT, investors take advantage of the same tax benefits as mutual fund investors. must have 100 investors and at least 75% of the trust’s income must come from real estate.
Return
Generally real estate investments have shown an overall rate higher than the prevailing interest rate charged by mortgage lenders.
tax credit
a direct reduction to the tax due rather than a deduction from income before tax is computed.
Uniform Commercial Code (UCC)
A codification of commercial law, adopted in most states, that attmpts to make uniform all laws relating to commercial transactions, including chattel mortgages and bulk transfers.
