Real Estate & Investing

754 Election A 754 election is the partnership tax election that can allow basis adjustments in partnership property or inside basis after certain transfers or distributions. Basis Step-Up Basis step-up is the adjustment that can raise the tax basis of inherited property to its value at the relevant date under the applicable rules. Cap Rate Cap rate, short for capitalization rate, is the ratio of a property's net operating income to its value or purchase price. Cash-Out Refinance A cash-out refinance is the refinancing transaction where a borrower replaces an existing loan with a larger new loan and receives cash from the difference. Cost Segregation Cost segregation is the analysis used to separate parts of a building or improvement into shorter depreciation lives when tax rules allow it. Debt Service Coverage Ratio Debt service coverage ratio, often shortened to DSCR, is the ratio comparing property or business cash flow to required debt payments. Depreciable Basis Depreciable basis is the portion of an asset's tax basis that is eligible to be depreciated. Installment Sale An installment sale is a sale where at least one payment is received after the tax year of sale, potentially spreading taxable gain recognition over time. Land Improvements Land improvements are site improvements such as paving, fencing, or landscaping that are distinct from the land itself for tax or accounting purposes. Like-Kind Exchange A like-kind exchange, often called a 1031 exchange, is a tax rule that can defer gain when qualifying investment or business real estate is exchanged under the required rules. Nonrecourse Debt Nonrecourse debt is debt secured primarily by collateral where the borrower generally is not personally liable beyond the pledged property, subject to the governing documents and law. Opportunity Zone Opportunity zone is the investment regime designed to encourage qualifying investment in designated areas through specific tax benefits when detailed requirements are met.