CES Like-Kind Property Requirements 2

Question 1

What term is used to describe property given up by the taxpayer in a 1031 exchange?

Accepted Answer

Relinquished property

Answer

Replacement property

Answer

Boot property

Answer

Exchange property

Question 2

In a 1031 exchange, what does 'boot' refer to?

Accepted Answer

Any unlike property or cash received in the exchange

Answer

The down payment on the replacement property

Answer

The qualified intermediary's fee

Answer

The fair market value of the relinquished property

Question 3

A taxpayer exchanges a property worth $500,000 for a replacement property worth $450,000 and receives $50,000 in cash. How is the $50,000 treated?

Accepted Answer

It is treated as boot and is taxable

Answer

It is tax-free as part of the exchange

Answer

It is deferred to the next exchange

Answer

It reduces the basis of the replacement property only

Question 4

Which of the following would create 'mortgage boot' in a 1031 exchange?

Accepted Answer

Acquiring a replacement property with a lower mortgage than the relinquished property

Answer

Acquiring a replacement property with a higher mortgage than the relinquished property

Answer

Paying off the mortgage before the exchange

Answer

Using all-cash to acquire the replacement property

Question 5

To fully defer capital gains tax in a 1031 exchange, the replacement property must have a value that is:

Accepted Answer

Equal to or greater than the relinquished property

Answer

Equal to or less than the relinquished property

Answer

Within 20% of the relinquished property value

Answer

At least double the relinquished property value

Question 6

Which of the following is considered 'exchange expenses' that reduce boot in a 1031 exchange?

Accepted Answer

Qualified intermediary fees

Answer

Loan origination fees

Answer

Hazard insurance premiums

Answer

Property management fees