Unit 18 Federal Income Taxation of Real Property Flashcards
A couple is planning on selling their principal residence in 2019. They have lived there since they purchased it in 2015. They calculate that if they receive close to their asking price that they will receive capital gains of $22,000. Assuming current tax laws will not change, the gain will most probably be
A tax exempt since it is their principal residence and was held for two years.
B taxed at the couple’s regular tax rate.
C taxed as ordinary income but at a lower rate.
D subject to the purchase price rule.
A tax exempt since it is their principal residence and was held for two years.
For tax purposes, the initial cost of an investment property plus the cost of any subsequent improvements to the property less depreciation represents the investment’s A adjusted basis. B capital gain. C basis. D market value.
A adjusted basis.
Which of the following statements is TRUE of capital gains?
A They may be realized only from the sale of improvements to real estate, not from the sale of the land itself.
B They may be realized only from the sale of the land itself, not from the sale of improvements to the real estate.
C They will be taxed at the taxpayer’s regular tax rate if the property was owned for one year or less.
D They must be paid only by property owners under the age of 65.
C They will be taxed at the taxpayer’s regular tax rate if the property was owned for one year or less.
Federal income tax law allows for
I a tax on all capital gains over $250,000.
II a possible exclusion of gain up to $500,000 from the sale of a personal residence by a married couple filing jointly.
A I only
B II only
C Both I and II
D Neither I nor II
B II only
Federal income tax laws do NOT currently allow a homeowner to deduct which of the following expenses from taxable income? A Mortgage interest B Real estate taxes C Discount points D Repairs or maintenance
D Repairs or maintenance
The profit homeowners receive from the sale of their principal residence may be
A rolled over into the purchase of a more expensive property without any tax liability once every 24 months.
B subject to long-term federal income tax if the profit exceeds the excluded limits.
C excluded from taxation every year up to a statutory limit of $500,000 per married couple filing jointly.
D taxed at a lower rate because depreciation is deductible from each annual income tax return.
B subject to long-term federal income tax if the profit exceeds the excluded limits.
An unmarried man, age 38, sells his home of eight years and realizes a $25,000 gain from the sale. Income tax on this gain may be
A excluded from taxation.
B excluded from taxation if the man purchases a property with a value equal to or exceeding the adjusted basis of the previous residence.
C reduced by subtracting the depreciation of the property when compared to the reproduction cost of a like-kind improvement.
D reduced by the amount of mortgage interest paid over the life of the property’s owner.
A excluded from taxation.
A woman, age 62, sells the home she has occupied for 18 months of the previous five years and realizes a $52,000 gain from the sale. Income tax on the profit from this sale may be
A taxed as long-term capital gains.
B postponed by purchasing another residence of equal or greater value within 12 months before or after the sale.
C eliminated if she donates at least 50% of the profit to a charity.
D reduced by the amount of mortgage interest paid over the property’s economic life.
A taxed as long-term capital gains.
Which of the following statements is TRUE about tax-deferred exchanges?
A The properties being exchanged must be of equal value.
B A taxpayer’s personal home can be used as an exchange property.
C A retail property must be exchanged for another retail property.
D Any boot that is received will be taxable.
D Any boot that is received will be taxable.
Which of the following statements is/are TRUE?
I Some of the expenses of a vacation home, that is also a rental property, may be tax deductible if the taxpayer/owner limits their private use of the home.
II An installment sales contract may provide tax benefits to the seller by spreading the sales income over several tax years.
A I only
B II only
C Both I and II
D Neither I nor II
C Both I and II
When you bought your home, you paid $120,000 for it, plus $2,600 in closing costs. You added $16,000 worth of capital improvements. When you sold the home for $165,000, you paid a 7% commission and other closing costs of $1,300. What was your cost basis? A $120,000 B $122,600 C $138,600 D $152,150
B $122,600
When you bought your home, you paid $120,000 for it, plus $2,600 in closing costs. You added $16,000 worth of capital improvements. When you sold the home for $165,000, you paid a 7% commission and other closing costs of $1,300. What was your adjusted basis? A $120,000 B $122,600 C $138,600 D $152,150
C $138,600
When you bought your home, you paid $120,000 for it, plus $2,600 in closing costs. You added $16,000 worth of capital improvements. When you sold the home for $165,000, you paid a 7% commission and other closing costs of $1,300. What was your amount realized? A $120,000 B $122,600 C $138,600 D $152,150
D $152,150
When you bought your home, you paid $120,000 for it, plus $2,600 in closing costs. You added $16,000 worth of capital improvements. When you sold the home for $165,000, you paid a 7% commission and other closing costs of $1,300. What was your capital gain? A $13,550 B $29,000 C $45,000 D $165,000
A $13,550
A man bought a cabin in the mountains five years ago for $20,000. Today he sold it for $25,000. What percent profit did he make on his investment? A 20% B 25% C 33% D 80%
B 25%
