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

Under MACRS, nonresidential real property is depreciated over 39 years using the straight-line method and the mid-month convention.

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

Cost segregation studies identify personal property and land improvement components qualifying for 5-, 7-, or 15-year depreciation instead of 27.5 or 39 years, accelerating the time value of tax deductions.

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

Unrecaptured Section 1250 gain—representing previously taken straight-line depreciation on real property—is taxed at a maximum rate of 25%, which falls between regular long-term capital gains rates and ordinary income rates.

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

Land cannot be depreciated because it is not subject to wear, exhaustion, or obsolescence; a determinable useful life is a prerequisite for depreciation deductions under tax law.

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

The TCJA increased bonus depreciation to 100% for qualified property placed in service after September 27, 2017, before the phased reduction began in 2023.

(REA) Real Estate Analyst Certification Practice Test

(REA) Real Estate Analyst Certification Practice Test

REA Real Estate Taxation & Accounting 2