Tax Planning Strategies Flashcards

To qualify as a real estate professional under IRC §469(c)(7), a taxpayer must spend more than half of personal service time in real property trades and at least how many hours?

Answer: 750 hours

The test requires more than 50% of working time and more than 750 hours in real property trades or businesses with material participation.

Under the passive activity rules, the $25,000 special allowance for rental losses for active participants fully phases out at what MAGI level?

Answer: $150,000

The allowance phases out by 50% of MAGI over $100,000 and is eliminated at $150,000.

A short-term rental with an average guest stay of 7 days or less is generally treated how under the passive activity rules?

Answer: Not as a rental activity, so material participation can make losses nonpassive

Average stays of 7 days or less exclude the activity from the rental definition, allowing losses to be nonpassive if the owner materially participates.

A married couple filing jointly sells their main home after owning and living in it for 3 of the last 5 years. What is the maximum gain they can exclude under §121?

Answer: $500,000

Joint filers meeting the ownership and use tests may exclude up to $500,000 of gain.

Unrecaptured Section 1250 gain from depreciation on real property is taxed at a maximum federal rate of:

Answer: 25%

Gain attributable to prior straight-line depreciation on real property is capped at a 25% rate.

Which strategy lets a seller of appreciated real estate spread gain recognition over multiple tax years as payments are received?

Answer: Installment sale

Under §453, an installment sale recognizes gain proportionally as principal payments are collected, though depreciation recapture is recognized in the year of sale.

Investing capital gains into a Qualified Opportunity Fund and holding the investment for at least 10 years provides what key benefit?

Answer: Appreciation on the QOF investment can be excluded via a basis step-up to fair market value

After a 10-year hold, the investor may elect to step up basis to fair market value, excluding post-investment appreciation.