Real Estate Investing Real Estate Investing Tax Implications of Ownership Questions and Answers 2

Question 1

What is the maximum annual passive activity loss deduction allowed for active participants in rental real estate under the special allowance rule?

Accepted Answer

$25,000

Answer

$15,000

Answer

$50,000

Answer

$100,000

Question 2

When a property owner dies and passes real estate to heirs, the tax basis of the property is adjusted to what value?

Accepted Answer

Fair market value at date of death

Answer

Original purchase price

Answer

Adjusted cost basis at death

Answer

Average of purchase price and fair market value

Question 3

Which IRS form is used to report rental real estate income and expenses?

Accepted Answer

Schedule E

Answer

Schedule A

Answer

Schedule C

Answer

Schedule D

Question 4

What is the depreciation recapture tax rate applied when selling a rental property that has been depreciated?

Accepted Answer

25%

Answer

10%

Answer

15%

Answer

28%

Question 5

In a tenancy in common (TIC) arrangement, how is rental income typically reported for tax purposes?

Accepted Answer

Each owner reports their proportional share on their own return

Answer

Only one owner reports all income

Answer

The TIC entity files a partnership return

Answer

Income is tax-exempt until the property is sold

Question 6

What is the net investment income tax (NIIT) rate that may apply to rental income for high-income taxpayers?

Accepted Answer

3.8%

Answer

1.5%

Answer

2.9%

Answer

5.0%

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