REA Real Estate Taxation & Accounting

Question 1

Under MACRS, the depreciation period for residential rental real property is:

Accepted Answer

27.5 years using straight-line method

Answer

15 years using accelerated methods

Answer

39 years using straight-line method

Answer

40 years using double-declining balance

Question 2

In a Section 1031 like-kind exchange, the taxpayer's primary tax benefit is:

Accepted Answer

Deferring capital gains taxes by reinvesting proceeds into replacement property

Answer

Permanently eliminating capital gains taxes on the relinquished property

Answer

Converting passive losses into active income deductions

Answer

Receiving a stepped-up basis equal to fair market value upon exchange

Question 3

In a Section 1031 exchange, 'boot' is best defined as:

Accepted Answer

Non-like-kind property or cash received by the taxpayer that may trigger taxable gain

Answer

The depreciated basis transferred from the relinquished property to the replacement property

Answer

Additional mortgage debt assumed on the replacement property above the relinquished loan

Answer

The 45-day identification period allowed to locate a replacement property

Question 4

Passive activity loss rules under IRC Section 469 generally require that:

Accepted Answer

Rental losses can only offset other passive income, subject to limited exceptions

Answer

All rental income is fully exempt from self-employment taxation

Answer

Real estate losses may freely offset W-2 earned income without limitation

Answer

Passive losses are permanently disallowed and may never be utilized

Question 5

A taxpayer qualifies as a 'real estate professional' for federal tax purposes only if:

Accepted Answer

They spend more than 750 hours per year in real property activities AND this exceeds 50% of their total personal services

Answer

They hold a valid state real estate broker license and report income on Schedule E

Answer

They own more than 10 rental properties generating positive cash flow

Answer

Their rental income exceeds their W-2 earned income for the tax year

Question 6

Long-term capital gains on the sale of investment real estate held more than one year are taxed at:

Accepted Answer

Preferential rates of 0%, 15%, or 20% based on the taxpayer's taxable income

Answer

Ordinary income tax rates up to 37%

Answer

A flat rate of 28% regardless of income level

Answer

The same marginal rate as short-term gains in the year of sale

Question 7

The $25,000 special allowance for rental real estate losses is available to active participants whose modified adjusted gross income (MAGI) is:

Accepted Answer

Below $100,000, phasing out ratably to zero at $150,000

Answer

Below $200,000, phasing out completely at $250,000

Answer

Below $75,000 with no phase-out for real estate professionals

Answer

Below $150,000 with a flat 50% reduction above that threshold