Real Estate Investing Real Estate Investing Real Estate Taxation Questions and Answers 2

Question 1

Which IRS form is used to report rental real estate income and expenses?

Accepted Answer

Schedule E

Answer

Schedule E (Form 1040) is used to report income or loss from rental real estate, royalties, partnerships, and S corporations.

Question 2

What is the standard depreciation recovery period for residential rental property under MACRS?

Accepted Answer

27.5 years

Answer

The IRS requires residential rental property to be depreciated over 27.5 years using the straight-line method under MACRS.

Question 3

In a 1031 exchange, what is the maximum number of days an investor has to identify replacement properties after selling the relinquished property?

Accepted Answer

45 days

Answer

The investor must identify potential replacement properties in writing within 45 days of selling the relinquished property.

Question 4

What tax benefit does cost segregation provide to real estate investors?

Accepted Answer

Accelerated depreciation of certain building components

Answer

Cost segregation reclassifies building components into shorter depreciation periods (5, 7, or 15 years), accelerating deductions.

Question 5

Under the passive activity loss rules, how much rental loss can a qualifying active participant deduct against ordinary income?

Accepted Answer

Up to $25,000

Answer

Active participants in rental activities with adjusted gross income under $100,000 can deduct up to $25,000 in rental losses against non-passive income.

Real Estate Investing Practice Test

Real Estate Investing Practice Test

Real Estate Investing Real Estate Investing Real Estate Taxation Questions and Answers 2