Section 7, Unit 4: Mortgage Lending Tax Impacts

Which of the following statements related to 1031 tax-deferred exchanges is true?

Foreign investors may participate.

What is the 200% rule as it relates to tax-deferred exchanges?

The combined fair market value of the property (or properties) being exchanged into cannot be more than 200% of the relinquished property.

In a 1031 exchange, there are rules governed by Section 1031 of the Internal Revenue Code. The rules include _______.

The property in an exchange must be like-kind.

John wants to do a 1031 tax exchange. He just sold his property. How many days does he have to close on a new property?

180

John wants to do a 1031 tax exchange with a property he just sold. How many days does he have to identify a new property for the exchange?

45

What is a reverse exchange?

An investor finds and closes on an investment property and then decides to immediately sell another investment property.

John sells his single-family home and purchases a new home for his family to reside in. Marcus owns a single-family home, but rents it out to a co-worker while he is on an extended two-year military tour overseas. Donald sells an apartment complex and purchases a new complex in a different part of the city. Which of these consumers is most likely to take advantage of a 1031 tax-deferred exchange?

Donald

Which of the following could an investor who sells an apartment house buy using a 1031 exchange?

Duplex, office building, or warehouse

Which of the following is a true statement about deducting interest on mortgages taken out in tax years between 2018 and 2025?

Interest on the first $750,000 of mortgage debt is deductible for married couples filing jointly or $375,000 for married couples filing separately.

What advantage does the 1031 tax-deferred exchange offer?

It allows investors to defer capital gains taxes when selling a property, provided they buy another property.

When an adjustable rate mortgage (ARM) makes its initial adjustment, it does so to its fully indexed rate. What makes up the fully indexed rate?

Margin plus index

What is the 95% rule as it relates to tax-deferred exchanges?

The total value of the property (or properties) being exchanged is at least 95% of the value of the property being sold.