Chapter 17 Questions

Under the Taxpayer Relief Act of 1997, a buyer can use up to how much of their IRA fund towards a down payment, without being subject to an early withdrawal penalty...?

$10,000

The net income of a property is $125,000. If the allowable annual depreciation is $22,500, what is the taxable income for the property...?

$102,500 (Dollars)

The depreciable basis of a commercial property is $525,000. Using the straight-line method, what is the allowable annual depreciation for the property...?

$13,461.54

Phillip purchased a single family home 10 years ago for $235,000. Since then, he has accrued $85,455 is deducted depreciation. If Phillip were to sell his property today, what would be his adjusted basis...?

$149,545

The depreciable basis of an income producing, non-residential property is $840,500. Using the straight-line depreciation method, what is the allowable annual depreciation of the property...?

$21,551.28

Jason purchased a property for $500,000. Over the 12 years he lived in the property, he accrued $218,000 is deducted depreciation. If Jason were to sell the property today, what would his adjusted basis be...?

$282,000 (Dollars)

The annual net income of a property is $154,000. If the taxable income is $105,000, what is the allowable annual depreciation for the property...?

$49,000

Under the Taxpayer Relief Act of 1997, joint filers can qualify up to how much in tax exemptions...?

$500,000

What is the taxable gain of a property that sold for $1,100,000 with an adjusted basis of $525,000...?

$575,000

The annual net income for a property is $218,000. If the taxable income is $156,000, what is the allowable annual depreciation of the property...?

$62,000

The depreciable basis for a single family residence is $225,000. Using the straight-line depreciation method, what is the allowable annual depreciation for the property...?

$8,181.82

If the net income on a property is $97,500 and the allowable annual depreciation is $8,725, what is the taxable income for the property...?

$88,775

If the sale price of a property is $1,500,000, what is the taxable gain, assuming an adjusted basis of $600,000...?

$900000

How much of the purchase price of a condominium is eligible for depreciation...?

100%

If the depreciable basis for a single family residence is $2,750,000, what is the annual allowable depreciation, assuming a 27.5 economic lifespan...?

100,000

This section of the Internal Revenue Code (IRC) allows for an exclusion on capital gains tax at the sale of a primary residence...?

121

When executing a 1031 Exchange, how many days does an owner have to acquire the new property...?

180 Days

The Taxpayer Relief Act of 1997 allowed homeowners to realize a $250,000 - $500,000 tax exemption at the sale of their property. However, the homeowner must have lived in the residence for how many years, within the past 5 years...?

2 years

Abby owns a 2 family investment property. Using the straight-line depreciation method, over how many years will Abby's property depreciate...?

27.5

Mark owns a single family residence. Using the straight-line depreciation method, what is the theoretical economic life of Mark's property...?

27.5

Using the straight-line depreciation method, income producing residential properties depreciate over how many years...?

27.5

Using the straight-line depreciation method, commercial property is depreciated over how many years...?

39

Using the straight-line depreciation method, income producing, non-residential properties depreciate over how many years...?

39

What is the Adjusted Basis on a property using the following criteria: Original Purchase Price: $500,000 Capital Improvements: $89,000 Depreciation: $184,000

405,000

When executing a 1031 Exchange, how many days does an owner have to identify a new property...?

45 days

The original cost of a property minus depreciation and sales of portions thereof, plus allowable additions such as capital improvements and certain carrying costs and assessments, is referred to as...?

Adjusted Basis

When does depreciation NOT help the owner of a property...? AAt the sale of the property BAt the purchase of the property CAfter the 1st year of ownership DAfter the 2nd year of ownership

At the sale of the property

A major accounting method that recognizes revenues and expenses at the time physical cash is actually received or paid out is known as...?

Basis

Cash received in a tax-deferred exchange is known as...?

Boot

Which of the following is considered a depreciable asset...?

Business Machinery

A profit that results from the sale of a property where the amount realized from the sale exceeds the purchase price is known as...?

Capital Gain

Operations income does NOT include which of the following...?

Capital Gains

This type of income is associated with the sale of a property...?

Capital Gains

Real estate investors will most likely benefit most from this type of depreciation...?

Component Depreciation

This means of depreciation breaks down a property into various components and then determines the depreciation on each component separately...?

Component Depreciation

The periodic expensing of an asset over the property's theoretical economic life is referred to as what...?

Depreciation

This type of depreciation is described by the physical deterioration of a property...?

Economic Depreciation

Under the Taxpayer Relief Act of 1997, buyers were allowed to use money from these funds toward a down payment without penalties...?

IRA Funds

According to the IRS, which of the following property types is NOT considered a permitted deduction on one's tax return...? AIncome producing properties BPrimary residence CTime share DVacant land

Income Producing properties

A 1031 exchanges applies to what types of property...?

Investment Properties

What type of properties benefit from a 1031 exchange?

Investment Properties

This program provided a dollar-for-dollar reduction in federal taxes for developers who built rental housing that serves low income households....?

LIHC

Which of the following assets are NOT depreciable...?

Land

Short-term capital gains applies to assets owned for this time period...?

Less than 1 year

When executing a 1031 exchange, the tax code requires an owner to purchase which of the following...? ALike-kind properties BLand CPrimary residence DSecondary residence

Like kind of properties

The IRS allows homeowners to deduct this from their tax returns...?

Mortgage Interest

The taxable income of a property is calculated by subtracting the depreciation from this...?

Net Income

The formula for determining realized gains is equal to...?

Net Sales Price - Adjusted Basis

Which of the following is NOT considered operations income...?

Net proceeds from sale of property

Property taxes on these types of properties can only be deducted if one's taxes are itemized...?

Non-investment properties

Short-term capital gains is taxed at what tax rate...?

Ordinary Income Tax Rates

Which of the following is the correct formula for determining the Adjusted Basis on a property...?

Original Purchase Price + Capital improvements - Depreciation

Earnings an individual derives from a rental property in which he or she is not actively involved is known as...?

Passive Activity Income

According to the IRS, which of the following property types are considered a permitted deduction...?

Personal Residences

A method of calculating the depreciation of an asset which assumes the asset will lose an equal amount of value each year, is known as...?

Straight Line Depreciation

An income deduction that allows a taxpayer to recover the cost or other basis of certain property is known as...?

Tax Depreciation

This type of depreciation is relevant to real estate...?

Tax Depreciation

The Low Income Housing Credit (LIHC) was established under this Act...?

Tax Reform Act of 1986

This Act lowered the top tax rate from 50% to 28%...?

Tax Reform Act of 1986

Any method of reducing taxable income resulting in a reduction of the payments to tax collecting entities, including state and federal governments, is known as...?

Tax Shelter

When depreciation is subtracted from net income to determine a property's taxable income, the depreciation is considered a...?

Tax deduction

Under Section 1031 of the US Internal Revenue Code, the exchange of certain types of property may defer the recognition of capital gains or losses due upon sale, and hence defer any capital gains taxes otherwise due is known as...?

Tax-Deferred Exchange

When calculating the amount of taxes to be paid on a property, the tax rate is multiplied by this number...?

Taxable Income

Due to this Act, the profits from the sale of a personal residence were allowed to be exempt...?

Taxpayer Relief Act of 1997

The depreciable basis for a single family residence is calculated using the following formula...?

Value of House - Land Value = Depreciable Basis