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	Tax Taxation of Profit     Property Taxation: Depreciation Taxation of Profit Adjusted Basis Home Mortgage Interest and Points Deduction   1031 EXCHANGES Capital Gains Tax Corporate Tax Corporation Dividend Tax Double Taxation European Union Savings Taxation Homeowners exemption Foreign Investment in Real Property Tax Act. Flat Tax Principles of Income Tax Income taxes Inheritance Tax Installment Sales Poll Tax Progressive Tax Property taxes California Propositions Purposes and Effects of Taxation Retirement Tax Sales Tax Sales leaseback Tariff Tax Credit, Exemption Equivalent and Tax Tax Rates Tax Treaty Direct and Indirect Taxation Value Added Tax When an asset is sold, exchanged or disposed of any income-taxable manner, the seller must calculate the gain or loss.   Gain or Loss Formula:    Sales Price ---------------------------------------------------------------------------------------------------------------------------------- -  Selling Expenses ---------------------------------------------------------------------------------------------------------------------------------- = Net Selling Price ---------------------------------------------------------------------------------------------------------------------------------- -  Adjusted Basis ---------------------------------------------------------------------------------------------------------------------------------- + Original cost ---------------------------------------------------------------------------------------------------------------------------------- + Improvements ---------------------------------------------------------------------------------------------------------------------------------- -  Accumulated Depreciation ---------------------------------------------------------------------------------------------------------------------------------- = Total Adjusted Basis        Net Selling Price ---------------------------------------------------------------------------------------------------------------------------------- -  Total Adjusted Basis ---------------------------------------------------------------------------------------------------------------------------------- = Net gain (or loss) on sale   Example 1: John purchases ten acres of land for $20,000 in 1993 and sells it to Mike in 2005 for $45,000. John's calculation is as follows:    Sales Price                                                                                    ---------------------------------------------------------------------------------------------------------------------------------- -  Selling Expenses                                                                              ---------------------------------------------------------------------------------------------------------------------------------- = Net Selling Price                                                                                    $45,000 ----------------------------------------------------------------------------------------------------------------------------------                    -  Adjusted Basis ----------------------------------------------------------------------------------------------------------------------------------                      + Original cost                                      + $20,000 ----------------------------------------------------------------------------------------------------------------------------------                      + Improvements ----------------------------------------------------------------------------------------------------------------------------------                      -  Accumulated Depreciation ----------------------------------------------------------------------------------------------------------------------------------                      = Total Adjusted Basis                                                         $-20,000 ---------------------------------------------------------------------------------------------------------------------------------- Net gain (or loss) on sale    (Net Selling Price - Total Adjusted Basis)           $25,000   Example 2: After purchasing the ten acres above, John builds a home in 1995 for $150,000 and sells it to Mike in 2004 for $245,000. John pays the following expenses: $17,150 commission (7%), $450 title insurance, $300 attorney's fee, $200 accountant fee; two pint origination fee $4900, closing cost $200; total selling expenses are $23,200. John's gain is calculated:    Sales Price                                                                                              $245,000   ---------------------------------------------------------------------------------------------------------------------------------- -  Selling Expenses                                                                                    -$23,200 ---------------------------------------------------------------------------------------------------------------------------------- = Net Selling Price                                                                                    $221,800 ----------------------------------------------------------------------------------------------------------------------------------                    -  Adjusted Basis ----------------------------------------------------------------------------------------------------------------------------------                      + Original cost                                      + $20,000 ----------------------------------------------------------------------------------------------------------------------------------                      + Improvements                                     +$150,000 ----------------------------------------------------------------------------------------------------------------------------------                      -  Accumulated Depreciation ----------------------------------------------------------------------------------------------------------------------------------                      = Total Adjusted Basis                                                         $-170,000 ---------------------------------------------------------------------------------------------------------------------------------- Net gain (or loss) on sale    (Net Selling Price - Total Adjusted Basis)           $51,800   Example 3: Continuing with the examples, assume that John rent out the home. He claims $16,136 of depreciation on his tax returns. Gain is calculated:    Sales Price                                                                                              $245,000   ---------------------------------------------------------------------------------------------------------------------------------- -  Selling Expenses                                                                                    -$23,200 ---------------------------------------------------------------------------------------------------------------------------------- = Net Selling Price                                                                                    $221,800 ----------------------------------------------------------------------------------------------------------------------------------                    -  Adjusted Basis ----------------------------------------------------------------------------------------------------------------------------------                      + Original cost                                      + $20,000 ----------------------------------------------------------------------------------------------------------------------------------                      + Improvements                                     +$150,000 ----------------------------------------------------------------------------------------------------------------------------------                      -  Accumulated Depreciation                    -$16,136 ----------------------------------------------------------------------------------------------------------------------------------                      = Total Adjusted Basis                                                         $-153,864 ---------------------------------------------------------------------------------------------------------------------------------- Net gain (or loss) on sale    (Net Selling Price - Total Adjusted Basis)           $67,936   Taxable gain on the sale of property sold on installment basis: Paula purchases business property for $500,000, paying $150,000 in cash over a first mortgage in the amount of $350,000. Later she sells the property for $650,000. The terms are $200,000 cash, a purchase mortgage of $150,00 and assumption of the first mortgage, which at the time of the sale has a balance of $300,000. Expenses of the sale amount cost her $30,000. During the period of ownership Paula add an improvement in the value of $50,000 and she is allowed depreciation deduction of $70,000.    Sales Price                                                                                                ----------------------------------------------------------------------------------------------------------------------------------                         Cash                                                       $200,000 ----------------------------------------------------------------------------------------------------------------------------------                         Purchase money mortgage                        $150,000 ----------------------------------------------------------------------------------------------------------------------------------                         First mortgage assumed                            $300,000 ---------------------------------------------------------------------------------------------------------------------------------- Sales Price                                                                                                $650,000 ---------------------------------------------------------------------------------------------------------------------------------- -  Selling Expenses                                                                                    -$30,000 ---------------------------------------------------------------------------------------------------------------------------------- = Net Selling Price                                                                                    $620,000 ----------------------------------------------------------------------------------------------------------------------------------                    -  Adjusted Basis ----------------------------------------------------------------------------------------------------------------------------------                      + Original cost                                      + $500,000 ----------------------------------------------------------------------------------------------------------------------------------                      + Improvements                                     +$50,000 ----------------------------------------------------------------------------------------------------------------------------------                      -  Accumulated Depreciation                    -$70,000 ----------------------------------------------------------------------------------------------------------------------------------                      = Total Adjusted Basis                                                         -$480,000 ---------------------------------------------------------------------------------------------------------------------------------- Net gain (or loss) on sale    (Net Selling Price - Total Adjusted Basis)           $140,000