Real Estate Taxation Flashcards
7 cards from real Real Estate Investing practice questions. Tap to flip, then mark Knew It or Still Learning — missed cards come back until you master them.
Read the first 7 Real Estate Taxation flashcards as text
What is the maximum amount of capital gains a married couple filing jointly can exclude from the sale of their primary residence under Section 121?
Answer: $500,000
Married couples filing jointly can exclude up to $500,000 in capital gains from the sale of a primary residence under the Section 121 exclusion.
In a 1031 exchange, what happens if an investor receives 'boot'?
Answer: Boot is taxable to the extent of gain realized
Boot (cash or non-like-kind property received in a 1031 exchange) is taxable to the investor to the extent of the gain realized on the relinquished property.
Which depreciation method is required by the IRS for residential rental property placed in service after 1986?
Answer: Straight-line over 27.5 years
The IRS requires straight-line depreciation over 27.5 years for residential rental property placed in service after 1986 under MACRS.
What is a 'qualified opportunity zone' investment's primary tax benefit for investors who hold for at least 10 years?
Answer: Permanent exclusion of gains on the QOZ investment itself
Investors who hold a qualified opportunity zone investment for at least 10 years can permanently exclude from income any gains on that QOZ investment itself.
Under the passive activity loss rules, which type of real estate investor can deduct up to $25,000 in rental losses against ordinary income?
Answer: Active participants with adjusted gross income below $100,000
Active participants in rental activities with AGI below $100,000 may deduct up to $25,000 in rental losses against ordinary income; this allowance phases out between $100,000 and $150,000 AGI.
What is 'cost segregation' used for in real estate taxation?
Answer: Accelerating depreciation by reclassifying components to shorter recovery periods
Cost segregation studies identify and reclassify building components to shorter depreciable lives (5, 7, or 15 years), accelerating depreciation deductions and improving cash flow.
When an investor sells a rental property for a gain, the portion attributable to previously claimed depreciation is taxed at what maximum federal rate?
Answer: 25%
Depreciation recapture on real property (unrecaptured Section 1250 gain) is taxed at a maximum federal rate of 25%, regardless of the taxpayer's regular capital gains rate.
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