Chapter 6

Question 1

Debt Service

Answer 1

Cost of borrowing money – includes principal and interest.

Question 2

How do you calculate depreciation?

Answer 2

Basis (purchase price)
- Land
—————————————————-
= Building Value
+ Acquisition Costs
—————————————————-
= Investment Value
/ Economic Life (resi or comm?)
—————————————————–
= Annual Depreciation
x # of Years Held
—————————————————-
= DEPRECIATION

Question 3

How do you calculate capital gains?

Answer 3

Adjusted Sales Price
- Adjusted Basis
—————————————————-
= CAPITAL GAINS

Question 4

How do you calculate adjusted sales price?

Answer 4

Sale Price
- Commissions
- Closing Costs
----------------------------------------------------
= ADJUSTED SALES PRICE

Question 5

How do you calculate adjusted basis?

Answer 5

Basis (Purchase Price)
\+ Acquisition Costs
\+ Improvements
- Depreciation
----------------------------------------------------
ADJUSTED BASIS