Real Estate Exam Chapter 17

Long-term capital gains applies to properties owned longer than...?

1 year

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

100 (Percent %)

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...?

102500

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 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...?

21551.28

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

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 years

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...?

282000

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

405000

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

45 days

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

575000

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...?

88775

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

Peter is in the process of selling his multi-family building. In order to take advantage of a 1031 exchange, Peter must purchase which of the following properties...?

Any of the above

In order to qualify for a 1031 exchange, a newly purchased property must be located where...?

Anywhere in the United States

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

Buildings

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

Business machinery

The difference between a lower selling price and a higher purchase price, resulting in a financial loss to the seller is known as...?

Capital Loss

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

The net result when income from an investment property is subtracted from the expenses is known as...?

Cash Flow

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

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

Economic depreciation

Which of the following types of depreciation is relevant to real estate...?

Economic depreciation

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

Equipment

According to the IRS, which of the following property types is NOT considered a permitted deduction on one's tax return...?

Income producing properties

What type of properties benefit from a 1031 exchange...?

Investment properties

This program was established to promote private sector involvement in the retention and production of rental houses for low income households...?

LIHC

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

Land

When executing a 1031 exchange, the tax code requires an owner to purchase which of the following...?

Like-kind properties

Which of the following is NOT a requirement for homeowners when deducting mortgage interest on their tax returns...?

Must have a 30-year amortization loan

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

Net Sales Price - Adjusted Basis

This type of income is realized by the owner during the year-to-year operations of the property...?

Operation income

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

Which of the following is NOT considered a depreciable asset...?

Personal use assets

The IRS considers mortgage interest a permitted deductible on this property type...?

Primary residence

According to the IRS, mortgage interest is considered a permitted deductible on this property type...?

Secondary residence

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 annual allowance for the wear and tear, deterioration, or obsolescence of a property is known as...?

Tax Depreciation

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

Tax Depreciation

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

Tax Reform Act of 1986

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

Tax depreciation

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

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

Value of house - land value = Depreciable basis