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Chapter 7 The Tax Environment

Chapter 7 The Tax Environment. Cash Flow Versus Taxable Income Real Estate as a Tax Shelter Analyzing Tax Impacts Passive Income/ Passive Loss Classifying Real Estate for Tax Purposes Dealer (ordinary income) Table 7-6 Investor (Capital Gains). Chapter 7 The Tax Environment.

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Chapter 7 The Tax Environment

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  1. Chapter 7The Tax Environment • Cash Flow Versus Taxable Income • Real Estate as a Tax Shelter • Analyzing Tax Impacts • Passive Income/ Passive Loss • Classifying Real Estate for Tax Purposes • Dealer (ordinary income) Table 7-6 • Investor (Capital Gains)

  2. Chapter 7The Tax Environment • Tax Status and Tax Rates • Noncorporate Tax Rates • Corporate Tax Rates

  3. Chapter 7The Tax Environment • Taxable Income from Operations • Operating Expenses and Taxes • Repairs vs. Capital Imprvt’s (deprec.) • Financing and Taxes • Depreciable Basis and the Mortgage • Interest Deductibility • Refinancing and Tax • Deductibility of Financing Cost • At-risk Limitations (issue in mtgs.)

  4. Chapter 7The Tax Environment • Taxable Income from Operations • Depreciation Deduction • What is Depreciation (recovery of cost of investment from taxable income) Non-cash • Determining the Depreciable Amount (cost of investment + capital expenditures - cost of land) • Basis Allocation (MV or Tax Appraisal) • Time Depreciated (Resid. 27.5 yrs./ Non Res. 39) • Component Cost Depreciation (Breakdown) • Alternative Minimum Tax (Older b/f 1987)

  5. Chapter 7The Tax Environment • Taxes on the Sale of an Investment • Capital Gains and Losses • Minimum Taxes on Sale • Minimum Taxes of Corporations

  6. Chapter 7The Tax Environment • Methods of Deferring Taxes on Disposition • The Installment Sale • Basic Requirements (series of payments, owner financing) lowers the tax burden from one period • Tax Deferred Exchanges (Sec. 1031) • Why Exchange (sale not possible, income tax deferral) • Basic Exchange Requirements • Productive use, trade, investment • Like Kind Transfers (Apartment for Retail)

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