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

Under MACRS, residential rental property uses a 27.5-year straight-line depreciation period, which is shorter than the 39-year period for commercial real property.

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

A 1031 exchange defers—not permanently eliminates—capital gains recognition, provided the investor reinvests proceeds in qualifying like-kind property within required timeframes.

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

Boot is any non-like-kind property or cash received in the exchange; its receipt triggers taxable gain to the extent of the lesser of boot received or total realized gain.

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

Section 469 limits passive losses to offsetting passive income; unused passive losses are suspended and released when the passive activity is fully disposed of in a taxable transaction.

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

To qualify under IRC §469(c)(7), the taxpayer must perform more than 750 hours of services in real property trades/businesses AND this must represent more than half of their total personal services for the year.

(REA) Real Estate Analyst Certification Practice Test

(REA) Real Estate Analyst Certification Practice Test

REA Real Estate Taxation & Accounting