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15 Cards in this Set
- Front
- Back
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An investor had a $40,000 long-term capital gain on property she owned. She pays taxes on her ordinary income at a maximum rate of 15%. Based on this information, the taxes on the capital gain would be
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The answer is $0. If the taxpayer's overall ordinary tax rate is in the 10% or 15% tax brackets, then the capital gains rate is zero.
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A man earned $100,000 in salary. He sold a triplex that he had purchased three years ago for a profit of $125,000. He sold some stock he had purchased in 1999 and had a long-term capital loss of $134,000. Based on this information, what will his taxable income be this year?
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The answer is $97,000. The taxpayer must net the capital gains from the capital losses, resulting in a negative $9,000 ($125,000 – $134,000). Because he can deduct only $3,000 in capital losses, his taxable income this year is $97,000 ($100,000 – $3,000).
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A woman purchased an apartment building four years ago for $675,000. This year, she refinanced the property, getting a new $900,000 loan. The additional $225,000 is
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The answer is not taxed. This is realized gain, but not recognized gain, because refinancing is a nontaxable event.
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The tax code relating to Section 1031 exchanges does NOT require that the properties be
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The answer is located in the same state. Properties held for investment may be located anywhere.
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Which is NOT identified as a tax preference item when calculating the alternative minimum tax (AMT)?
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The answer is capital gains on non-residential property. All other items are subject to the special levy to make certain that very wealthy people with many deductions pay at least some taxes.
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Which situation BEST describes "realized gain" that is not "recognized gain"?
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The answer is a woman refinances her property that has appreciated 40% in the last two years. Realized gain is actual profit derived from a property; recognized gain is the portion of the profit subject to tax. Refinancing is not a taxable event.
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An investor owns an office building and is trying to calculate how much taxable income the building has for the year. Which expense may she NOT deduct?
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The answer is reserves for replacements. While depreciation can be deducted, reserves for replacements may not be deducted as an expense of the property.
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What is the typical annual depreciation for an office property purchased for $824,000 if the land value represents 22% of the total?
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The answer is $16,480. First, determine the value of the building for depreciation purposes: $824,000 × .78 (100% – 22%) = $642,720. Because it is an office building, it is depreciated over 39 years, so depreciation is $16,480 ($642,720 ÷ 39 years).
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In some cases, parts of a building may be considered to be personal property and have a shorter depreciable life than the actual real property. Which is NOT one of the considerations the IRS will use when evaluating such elections?
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The answer is does the property have a value in excess of $5,000? Other considerations that the IRS will evaluate are: Is the property readily movable? How is the property affixed to the land? Do the circumstances show that the property may or will have to be moved?
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If a person refinances a property, realized gains become recognized gains when the
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The answer is property is sold. Refinancing is a nontaxable event, so the gain is not recognized until the sale of the property. When the owner dies, it has no impact on the capital gain unless the estate sells the property.
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A full-time real estate broker has an office staff of 25. He owns an apartment property that showed negative taxable income of $30,000 last year. His only other income was the $225,000 that he made from his company. Based on this information, what was his taxable income for last year?
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The answer is $195,000. Because the taxpayer is a real estate professional who devotes more than 50% of his time and at least 750 hours each year to his business, he may deduct the losses from his real estate investments, even though the investments are passive.
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The estate and gift tax lifetime exclusion for 2013 is
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The answer is $5.25 million. The estate and gift tax lifetime exclusion is the same.
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An example of a passive activity is
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The answer is owning an apartment building. All real estate rental activity is considered passive, no matter how involved the owners are, except corporation-owned rentals and the operation of a hotel, motel, or inn.
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Which statement is FALSE regarding a taxpayer's income tax deductions?
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The answer is the taxpayer may deduct the total of his mortgage payments. This is an incorrect statement, because borrowers may not deduct the principal portion of the mortgage payment, only the interest.
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An investor purchased a vacant site for $400,000 in 1994. He sold it in September of this year, receiving $540,000 after paying sales expenses. Assuming there is no depreciation, and he pays taxes at the maximum capital gains tax rate of 15%, what is his tax liability from this sale?
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The answer is $0. If the taxpayer's overall ordinary tax rate is in the 10 or 15% tax brackets, then the capital gains rate is zero.
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