REA Real Estate Taxation & Accounting 2

Question 1

Under MACRS, nonresidential (commercial) real property is depreciated over:

Accepted Answer

39 years using straight-line depreciation

Answer

15 years using an accelerated method

Answer

27.5 years using straight-line depreciation

Answer

40 years using the double-declining balance method

Question 2

A cost segregation study benefits a real estate investor primarily by:

Accepted Answer

Reclassifying building components into shorter depreciable lives to accelerate deductions

Answer

Increasing the property's appraised market value for refinancing purposes

Answer

Reducing the property's assessed value for local property tax purposes

Answer

Establishing a higher carryover basis in replacement property for a 1031 exchange

Question 3

Unrecaptured Section 1250 gain on the sale of depreciable real property is subject to a maximum federal tax rate of:

Accepted Answer

25%

Answer

15%

Answer

20%

Answer

37%

Question 4

Land is excluded from depreciation deductions primarily because:

Accepted Answer

Land does not have a determinable useful life and is assumed to last indefinitely

Answer

The IRS classifies land as a liquid current asset on the taxpayer's balance sheet

Answer

Local zoning regulations limit changes in land use value over time

Answer

Depreciation of land is automatically deferred until the property is disposed of

Question 5

Under the Tax Cuts and Jobs Act of 2017, the first-year bonus depreciation percentage for qualifying property placed in service after September 27, 2017 was set at:

Accepted Answer

100%

Answer

50%

Answer

75%

Answer

80%

Question 6

When computing Net Operating Income (NOI) versus taxable income, depreciation is properly treated as:

Accepted Answer

A non-cash deduction reducing taxable income but excluded from the NOI calculation

Answer

A cash operating expense reducing both NOI and taxable income equally

Answer

An above-the-line item added to effective gross income before expenses

Answer

A deferred tax liability recognized only on the GAAP balance sheet

Question 7

Qualified Improvement Property (QIP) placed in service after December 31, 2017 has a MACRS recovery period of:

Accepted Answer

15 years, making it eligible for bonus depreciation after the CARES Act correction

Answer

39 years with no bonus depreciation eligibility as interior commercial improvements

Answer

27.5 years, treated similarly to residential leasehold improvements

Answer

7 years as tangible personal property under general MACRS rules