Income Tax and Sale of Property

Question 1

Capital Asset

Answer 1

Generally includes all assets owned as an investment or for personal purposes, e.g., stocks, bonds, a personal residence, household furnishings, cars, precious metals, and assets used in a trade or business

Question 2

Capital Gain or Loss

Answer 2

A gain or loss on the sale of a capital asset

Question 3

Cost

Answer 3

Historical expenditure for the purchase, construction, or improvement of a property

Question 4

Personal Residence Gain Exclusion

Answer 4

A gain exclusion from taxable income from the sale of a personal residence that has been the taxpayer’s primary residence for 2 of the past 5 years

Question 5

Points

Answer 5

1 percent of the loan amount paid to the lender or the lender’s agent at the time the loan is made

Question 6

Principal (Primary) Residence

Answer 6

Not restricted to single-family homes, but may include a house, townhouse, mobile home, houseboat, co-op, or condominium apartment used as the taxpayer’s main home; the home that a taxpayer lives in most of the time during the tax year

Question 7

Unadjusted Basis

Answer 7

The original cost of the property, if it was purchased