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If you sell it and become homeless, yeah. Otherwise you'll be buying a $100k home for $1M, which cancels out all the profits that you made from the sale.
by lottin 5y ago
If you sell it and become homeless, yeah. Otherwise you'll be buying a $100k home for $1M, which cancels out all the profits that you made from the sale.
- spywaregorilla 5y agoThat's not how profits work. Or accounting in general. If you sell for +1M and then buy a different home for $1M, you've recorded a gain of $1M. It doesn't matter if you spend it on another house or don't. Your balance of cash may stay the same, but you've still profited. And the gain is taxable.
- lottin 5y agoThat's the accounting profit. Suppose you keep the house, your accounting profit would be zero. If instead you sell the house, and buy it back immediately for the same price, now you have an accounting profit. From this example, it's obvious that the accounting profit can be misleading. What matters is not the accounting profit but the economic profit (aka actual profit).