Question 1

Start-up costs for a business:

Accepted Answer

A)   may be deducted in full in the year the company began.
B)   must be prorated over the life of your company.
C)   have a cap of $50,000.
D)   have a cap of $1,000,000. C

Question 2

Closing costs that may be tax deductible may include:

Accepted Answer

A)   prepaid interest.
B)   prepaid taxes.
C)   points.
D)   all of the above. D

Question 3

Finding legal ways to lower your tax bill is called:

Accepted Answer

A)   tax evasion.
B)   tax avoidance.
C)   forbearance.
D)   tax aversion. B

Question 4

Name the four classifications of real estate for income tax purposes.

Accepted Answer

The answer of Name the four classifications of real estate...

Question 5

What are the tax consequences of converting a rental into a personal residence?

Accepted Answer

A)   There are no consequences.
B)   You may continue to deduct repairs but cannot continue to deduct depreciation.
C)   If you sell the house, you must subtract accrued depreciation in calculating your gain.
D)   You cannot deduct repairs but can continue deducting depreciation.

Question 6

To qualify for the low-income housing tax credit, the units must meet a use test, which says:

Accepted Answer

A)   units must be occupied by people that the builder/developer deems are low income.
B)   units must be occupied only by people who also receive food stamps.
C)   certain percentages of the units must be occupied by people who earn less than certain percentages of the median income for the area.
D)   certain percentages of the units must be occupied by people who are placed there by the local housing authority.

Question 7

Business losses can be carried back to offset gains for how many of the previous tax years?

Accepted Answer

A)   Three
B)   Five
C)   One
D)   None

Question 8

The federal income tax code is very complex because:

Accepted Answer

A)   it has been put together piecemeal over time.
B)   it was written to confuse the average taxpayer.
C)   it was written by lawyers.
D)   it was written by accountants.

Question 9

Changes to the federal tax code can be retroactive.

Accepted Answer

A) True 
 B)False

Question 10

Name two ways that the federal tax code encourages investment in real estate.

Accepted Answer

The answer of Name two ways that the federal tax...

Question 11

It is said that everyone needs to take into account the federal income tax consequences of whatever they are thinking of buying or selling. Why? And explain why sometimes all the planning in the world won't make any difference.

Accepted Answer

The answer of It is said that everyone needs to...

Question 12

A real estate developer typically pays regular income tax on his or her profits.

Accepted Answer

A) True 
 B)False

Question 13

The current cap on capital gains is:

Accepted Answer

A)   30%.
B)   45%.
C)   15%.
D)   5%.

Question 14

Your brother needs a home desperately, and you have been transferred to Jakarta. He cannot get a conventional loan because he has terrible credit. You decide to sell him your house, with a right of first refusal. You do a seller-financed transaction even though you are pretty certain that your brother will never pay much on the debt. Because he is your brother, you decide to charge him no interest. If the IRS finds out about this arrangement, what might be the tax consequences?

Accepted Answer

The answer of Your brother needs a home desperately, and...

Question 15

In a like-kind exchange, the taxpayer:

Accepted Answer

A)   avoids paying gain on the sale of investment property.
B)   defers paying gain on the sale of investment property.
C)   may use the exchange and then deduct a loss on the exchange.
D)   is limited to a 5% capital gains tax.

Question 16

Define "after-tax return."

Accepted Answer

The answer of Define "after-tax return."...

Question 17

A special advantage of the low-income housing tax credit is:

Accepted Answer

A)   the credit may be used to offset taxes due on all types of income.
B)   it is unlimited in amount.
C)   it is unlimited over time.
D)   it automatically lowers the taxpayer's tax by 50%.

Question 18

In a like-kind exchange, a person might sell a condominium and buy a Porsche convertible.

Accepted Answer

A) True 
 B)False

Question 19

Define "dealer property." What is the tax consequence of dealer property?

Accepted Answer

The answer of Define "dealer property." What is the tax...

Question 20

For tax purposes, 'boot' refers to:

Accepted Answer

A)   taking a tax loss after being fired from your job.
B)   the tax consequences of a divorce.
C)   the amount of taxable assets added to a like-kind exchange.
D)   the time period in a like-kind exchange in which you have to locate another piece of property.

Exam 13: Property Management and Leasing

Start-up costs for a business:

Closing costs that may be tax deductible may include:

Finding legal ways to lower your tax bill is called:

Name the four classifications of real estate for income tax purposes.

What are the tax consequences of converting a rental into a personal residence?

To qualify for the low-income housing tax credit, the units must meet a use test, which says:

Business losses can be carried back to offset gains for how many of the previous tax years?

The federal income tax code is very complex because:

Changes to the federal tax code can be retroactive.

Name two ways that the federal tax code encourages investment in real estate.

It is said that everyone needs to take into account the federal income tax consequences of whatever they are thinking of buying or selling. Why? And explain why sometimes all the planning in the world won't make any difference.

A real estate developer typically pays regular income tax on his or her profits.

The current cap on capital gains is:

In a like-kind exchange, the taxpayer:

Define "after-tax return."

A special advantage of the low-income housing tax credit is:

In a like-kind exchange, a person might sell a condominium and buy a Porsche convertible.

Define "dealer property." What is the tax consequence of dealer property?

For tax purposes, 'boot' refers to: