REA Real Estate Taxation & Accounting 3

Question 1

A Qualified Opportunity Zone (QOZ) investment primarily provides investors with:

Accepted Answer

Deferral of prior capital gains, potential step-up in basis, and exclusion of new appreciation after 10 years

Answer

QOZ investments allow investors to defer capital gains on prior investments, potentially reduce those deferred gains after a holding period, and exclude all appreciation in the Opportunity Fund if held at least 10 years.

Question 2

The 3.8% Net Investment Income Tax (NIIT) applies to:

Accepted Answer

Net investment income of high-income taxpayers with MAGI exceeding $200,000 (single) or $250,000 (MFJ)

Answer

The 3.8% NIIT applies to the lesser of net investment income or MAGI above $200,000 (single) or $250,000 (married filing jointly); passive rental income is generally subject to this surtax.

Question 3

Under IRC Section 704(c), when a partner contributes appreciated property to a real estate partnership, the pre-contribution built-in gain is:

Accepted Answer

Allocated solely to the contributing partner upon the property's disposition

Answer

Section 704(c) requires that pre-contribution built-in gains or losses be allocated back to the contributing partner upon disposition, preventing the shifting of embedded tax consequences to other partners.

Question 4

For U.S. GAAP financial reporting purposes, investment real property is typically carried at:

Accepted Answer

Historical cost less accumulated depreciation under the cost model

Answer

Under U.S. GAAP, investment real property is recorded at historical cost less accumulated depreciation; unlike IFRS, U.S. GAAP does not permit upward revaluation of real property to fair value.

Question 5

The installment sale method under IRC Section 453 allows a real estate seller to:

Accepted Answer

Recognize gain proportionally as each payment is received based on the gross profit ratio

Answer

Under the installment method, gain is recognized proportionally as each payment is received based on the gross profit ratio (gain ÷ contract price), spreading the tax liability over multiple years.

(REA) Real Estate Analyst Certification Practice Test

(REA) Real Estate Analyst Certification Practice Test

REA Real Estate Taxation & Accounting 3