CTC Real Estate Tax Strategies

Question 1

Under IRC Section 1031, what type of property exchange allows a taxpayer to defer capital gains tax?

Accepted Answer

Like-kind exchange of investment or business property

Answer

IRC Section 1031 allows deferral of capital gains when taxpayers exchange investment or business property for property of a like-kind, provided specific identification and timeline rules are met.

Question 2

What is the straight-line depreciation recovery period for residential rental property under MACRS?

Accepted Answer

27.5 years

Answer

Residential rental property is depreciated over 27.5 years using the straight-line method under MACRS, while commercial real property uses 39 years.

Question 3

Under the passive activity loss rules of IRC Section 469, what is the maximum rental real estate loss a taxpayer may deduct annually if AGI does not exceed $100,000?

Accepted Answer

$25,000

Answer

IRC Section 469(i) provides a $25,000 special allowance for rental real estate losses for taxpayers who actively participate and whose AGI does not exceed $100,000.

Question 4

What is the annual depreciation period for commercial (nonresidential) real property under MACRS?

Accepted Answer

39 years

Answer

Nonresidential commercial real property placed in service after May 12, 1993 is depreciated straight-line over 39 years under MACRS.

Question 5

To qualify as a 'real estate professional' under IRC Section 469(c)(7) and avoid passive loss limitations, how many hours per year must a taxpayer spend in real property trades or businesses?

Accepted Answer

More than 750 hours

Answer

IRC Section 469(c)(7) requires more than 750 hours per year in real property trades or businesses in which the taxpayer materially participates, and this must exceed time spent in any other trade or business.

CTC - Certified Tax Coach Practice Test

CTC - Certified Tax Coach Practice Test

CTC Real Estate Tax Strategies