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What Every Real Estate Investor Needs to Know About Cash Flow... And 36 Other Key Financial Measures, Updated Edition, 2nd Edition by Frank Gallinelli

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CHAPTER 41Calculation 35: Gain on Sale

What It Means

The gain on sale (or simply gain) is the taxable profit that you make when you sell an income-property investment. Under current rules, if you have held the property for more than 12 months, then the gain is a capital gain, which means that at least some of it will be taxed at a rate that is lower than what you pay on ordinary income.

How to Calculate

It would be nice to tell you that the gain on sale is merely the difference between what you paid for a property and the price for which you eventually sell it. Nice, but not accurate. It is actually the difference between the property’s adjusted basis and its selling price.

To keep focused here on the concept of gain, we have discussed the calculation ...

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