Common Questions

Calculating Gain

One of the most popular investor questions we receive is how to calculate gain when selling a property. This is a very serious area, as there are many deductions and formula variables that sellers (and their accountants!) miss regularly.

Capital Gain = Adjusted Selling Price minus Adjusted Cost Basis

Adjusted Selling Price

= Selling price

MINUS

• Selling expenses (realtor fees, fees, advertising)
  
• Expenses to fix up to sell
  
• Loan charges paid by Seller (loan placement fees, points)
  
• Excise taxes
  

Adjusted Cost Basis

= Original purchase price

PLUS

• Costs associated with original purchase (all fees, RE taxes owed, inspection costs—not points
  
• Major improvement expenses—not routine maintenance
  

MINUS

• Deductible casualty losses (e.g. caused by natural disasters)
  
• Depreciation allowed or allowable if the home was used for business or rental purposes