Lesson 14: Federal Income Taxation and Real Estate

Which of the following is true?

A: A $6,000 tax deduction is of more benefit to the taxpayer than a $6,000 tax credit

Which of the following is NOT considered boot?

A: A single-family residential rental traded for a small warehouse

After three years of ownership, Jones added the total of her capital expenditures and subtracted her allowable depreciation to determine her;

A: Adjusted basis

For which of the following types of properties are depreciation deductions allowed?

A: Income-producing property?

A second home is classified as:

A: Personal Use Property

For income tax purposes, a homeowner can deduct:

A: Property taxes

Which of the following is not eligible for a tax-free exchange?

A: Subdivided land held by a developer

Initial tax basis less depreciation deductions equals the:

B: Adjusted basis

Depreciation deductions:

B: Decrease basis

A loss in value that is a cost that can be recovered is:

B: Depreciation

Boot is taxed:

B: In the year it is received

The IRS treats any economic benefit to a taxpayer as:

B: Income

Our federal income tax is a progressive tax. This means that the tax rate:

B: Increases as income increases

A taxable gain is generally recognized in the year it is:

B: Realized

What are the income Tax advantages of an installment sale?

B: The realized gain is reported over a number of years

When residential property is sold and the seller's gain on the sale is less than $250,000, the seller will not have to pay taxes on the transaction if:

B: The seller lived in the house for at least two of the last five years

For federal income tax purposes, when can you depreciate a single-family dwelling?

B: When it is rented

Which of the following is considered a capital expenditure?

C: Adding a new room to a home

Smith trades his triplex to Jones for Jones's duplex and $10,000. The cash from Jones is called:

C: Boot

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

C: Capital Gain

Which of the following is not depreciable property?

C: Grazing land

Which of the following may Jones deduct from her taxable income when preparing her income tax statement?

C: Interest paid on home mortgage

Which of the following represents an involuntary conversion?

C: Owner receives condemnation award

Which of the following properties cannot be depreciated?

C: Personal residence

Federal Income Tax is:

C: Progressive

Tax Credits are:

C: Subtracted directly from the tax owed

From an income tax standpoint, which of the following is an attractive feature of home ownership? The homeowner can:

D: Claim mortgage interest deductions

Which of the following types of property is not eligible for installment sales tax treatment?

D: Dealer property

Which of the following would affect a taxpayer's basis in a six-unit apartment building?

D: Installing patios or balconies for each unit

Owens proposed a tax-deferred exchange of his home for Martin's peach orchard. Which of the following is true?

D: Principal residence property