Calculating Gain... Correctly

Even with advanced Real Estate investors, we often see incorrect gain calculations upon disposition of property. Visit our website for more details, but here is the short summary:

Capital Gain = Adjusted Selling Price minus Adjusted Cost Basis


Adjusted Selling Price
= Selling price
MINUS
o Selling expenses (realtor fees, fees, advertising)
o Expenses to fix up to sell
o Loan charges paid by Seller (loan placement fees, points)
o Excise taxes


Adjusted Cost Basis
= Original purchase price
PLUS
o Costs associated with original purchase (all fees, RE taxes owed, inspection costs, ---not points---)
o Major improvement expenses (---not routine maintenance---)
MINUS
o Deductible casualty losses (e.g. caused by natural disasters)
o Depreciation allowed or allowable if the home was used for business or rental purposes

Scott Lukes
Founder, Echo Summit Properties
http://www.echo-summit.com/