Real Estate Investing Legal and Tax Implications 3

Question 1

Under the Fair Housing Act, which of the following is a protected class at the federal level?

Accepted Answer

National origin

Answer

The federal Fair Housing Act protects race, color, national origin, religion, sex, familial status, and disability — national origin is explicitly listed.

Question 2

What is the residential depreciation period for rental properties under current US tax law?

Accepted Answer

27.5 years

Answer

The IRS requires residential rental property to be depreciated using the straight-line method over 27.5 years.

Question 3

An investor purchases a rental property for $300,000. The land is valued at $50,000. What is the depreciable basis?

Accepted Answer

$250,000

Answer

Land cannot be depreciated, so the depreciable basis is the purchase price minus the land value: $300,000 − $50,000 = $250,000.

Question 4

Which legal doctrine allows a court to 'pierce the corporate veil' of an LLC?

Accepted Answer

When the owner commingles personal and business funds

Answer

Courts may pierce the veil and hold owners personally liable if they fail to treat the LLC as a separate entity, such as by commingling funds.

Question 5

What is a 'quiet title' action in real estate?

Accepted Answer

A lawsuit to resolve competing claims or clouds on a property's title

Answer

A quiet title action is a court proceeding used to establish clear ownership and remove any adverse claims, liens, or encumbrances clouding the title.

Real Estate Investing Practice Test

Real Estate Investing Practice Test

Real Estate Investing Legal and Tax Implications 3