Investment and income tax – key terms Flashcards
Taxable, not like kind property used in an exchange, such as cash or other personal property that is used to balance an exchange of real property
Boot
The gain from the sale of a capital asset for example one held for investment purposes
Capital gains income
The amount remaining after paying all operating expenses and debt service but before taking into account any income tax benefits or cost of ownership
Cash flow before income taxes
Rent owed but not collected
Credit losses
The amount of money paid a regular intervals toward reducing the principal and interest owed on a debt
Debt service
A transaction that, under provisions of section 1031 of the internal revenue code, allows a taxpayer to sell an investment property and purchase another investment property in its place without paying capital gains on the proceeds from the sale
Delayed exchange – also called like kind exchange, tax deferred exchange, or 1031 exchange
Potential gross income less vacancy and collection losses
Effective gross income (EGI)
All income received from all sources
Gross income
The amount of income generated by a commercial property operating at full capacity with no vacancies
Gross scheduled income
Income after all operating expenses have been deducted but before debt service and taxes are considered
Net operating income (NOI)
Day-to-day cost of running a building such as repairs and maintenance, but not including debt service or depreciation
Operating expenses
Any income from salaries, wages, commissions, and interest
Ordinary income
Any type of income received by an entity such as a limited liability company LLC that is not taxed at the level of the entity that passes through to be taxed at the level of the individuals in the entity
Pass-through income
The amount of time over which the owner may take deductions to recover their investment
Recovery period
A depreciation method that divides the total depreciation evenly over a stated number of years
Straight line depreciation
