EXERCISE 15.2 Basic tax concepts

In most cases, a taxpayer’s ______________ is equal to the actual amount of his investment—that is, how much it cost to acquire the property.

A taxpayer who is entitled to a/an ______________ can subtract a specified amount from her income before it’s taxed.

A gain on the sale of an asset held for personal use or as an investment is considered a/an ______________.

A/an ______________ increases the value of the property or significantly extends its useful life.

Capital expenditures are added to the initial cost of acquiring the property in calculating the ______________.

A taxpayer’s income is added up, the tax rate is applied, and then any applicable ______________ is subtracted to determine how much the taxpayer will actually have to pay.

A gain is not considered taxable income until it is ______________.

A maintenance expense, such as repainting or replacing a broken window, is not a/an ______________.

The ______________ is the tax rate that will be applied to the last taxable dollar that a person earns.