Real Estate Investing Tax Implications of Ownership 2

Question 1

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?

Accepted Answer

$500,000

Answer

$250,000

Answer

$750,000

Answer

$1,000,000

Question 2

Which IRS tax form is used to report rental income and expenses from a residential rental property?

Accepted Answer

Schedule E

Answer

Schedule C

Answer

Schedule D

Answer

Form 4797

Question 3

How is real estate held for more than one year before sale typically taxed at the federal level?

Accepted Answer

At long-term capital gains rates

Answer

As ordinary income

Answer

At a flat 28% rate

Answer

As self-employment income

Question 4

What does 'basis' mean in the context of real estate taxation?

Accepted Answer

The original purchase price plus capital improvements

Answer

The annual rental income from a property

Answer

The appraised market value at time of sale

Answer

The assessed value used for property tax purposes

Question 5

Which of the following expenses is NOT deductible against rental income?

Accepted Answer

Personal vacations to inspect the property

Answer

Mortgage interest

Answer

Property management fees

Answer

Insurance premiums

Question 6

What is the 'unrecaptured Section 1250 gain' tax rate that applies to depreciation taken on real property?

Accepted Answer

25%

Answer

15%

Answer

20%

Answer

28%

Question 7

A real estate investor purchases a duplex, lives in one unit, and rents the other. How are expenses typically handled?

Accepted Answer

Expenses must be allocated proportionally between personal and rental use

Answer

All expenses are fully deductible as rental expenses

Answer

No expenses are deductible because it is partially personal use

Answer

Only mortgage interest is deductible