CTC Real Estate Tax Strategies 3

Question 1

For a taxpayer with AGI of $130,000, what amount of the $25,000 passive rental real estate loss special allowance is still available under IRC Section 469(i)?

Accepted Answer

$10,000

Answer

$25,000

Answer

$0

Answer

$15,000

Question 2

What entity structure is most commonly recommended to hold investment real estate to achieve both liability protection and pass-through taxation for a tax coaching client?

Accepted Answer

Limited Liability Company (LLC) taxed as a partnership

Answer

C Corporation

Answer

S Corporation

Answer

Sole proprietorship

Question 3

What is the primary tax disadvantage for a taxpayer classified as a 'dealer in real estate' rather than an 'investor'?

Accepted Answer

Gains are taxed as ordinary income and subject to self-employment tax rather than at capital gains rates

Answer

Depreciation deductions are not allowed on dealer property

Answer

Passive activity loss rules apply more strictly to dealers

Answer

Installment sale reporting is prohibited for dealers

Question 4

When calculating the adjusted basis of a rental property, which of the following correctly increases the owner's basis?

Accepted Answer

Capital improvements added to the property

Answer

Depreciation deductions claimed each year

Answer

Casualty losses claimed as deductions

Answer

Rent income received from tenants

Question 5

Under IRC Section 469, what does the 'grouping election' allow real estate investors to do?

Accepted Answer

Treat multiple rental activities as a single activity to more easily meet material participation tests

Answer

Group all passive losses together to apply against any active income

Answer

Combine real estate income with self-employment income for SE tax purposes

Answer

Aggregate all property values for a single depreciation calculation

Question 6

What tax planning strategy involves a property owner selling a property below its appraised value to a family member and claiming a gift for the difference?

Accepted Answer

Bargain sale

Answer

Installment sale

Answer

Like-kind exchange

Answer

Charitable remainder trust transfer

Question 7

What is the primary purpose of a Delaware Statutory Trust (DST) in a 1031 exchange tax strategy?

Accepted Answer

To allow investors to acquire fractional interests in institutional-grade real estate as replacement property in a 1031 exchange

Answer

To convert rental income to tax-exempt income

Answer

To avoid depreciation recapture on commercial real estate sales

Answer

To hold primary residences and qualify for the Section 121 exclusion