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7.Government Rights in Real Property Quiz

7.Government Rights in Real Property Quiz

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Question 1 of 10

1. Question

What distinguishes ordinary income from capital gains in real estate taxation?

Ordinary income is taxed at a fixed rate, while capital gains are not taxed.
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Capital gains are profits from the sale of property, taxed differently than ordinary income.
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Ordinary income includes rental income, whereas capital gains are derived from salaries.
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Capital gains are only applicable to commercial properties.
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Question 2 of 10

2. Question

What type of income do rental properties typically generate?

Active income
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Portfolio income
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Passive income
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Deferred income
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Question 3 of 10

3. Question

How is income from pass-through entities, like LLCs, taxed?

At the entity level only
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At both the entity and individual levels
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At the individual level only
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It is not taxed
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Question 4 of 10

4. Question

What is a 1031 exchange in the context of real estate?

A swap of properties that allows for capital gains tax deferral
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A direct sale of property where capital gains tax is immediately applicable
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A method to convert rental properties into primary residences for tax purposes
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An exchange of services for property without tax implications
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Question 5 of 10

5. Question

How does depreciation benefit real estate investors at tax time?

It increases the value of the property on tax returns.
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It allows investors to take a deduction for the perceived decrease in property value.
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It reduces the amount of rental income received.
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It is a direct credit against property taxes owed.
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Question 6 of 10

6. Question

What tax advantages does investing in Opportunity Zones offer?

Immediate tax exemption on all profits
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Deferral and potential reduction of capital gains taxes
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Fixed tax rate for all income derived from the zone
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Exemption from property taxes
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Question 7 of 10

7. Question

Under what conditions can capital losses be carried forward to offset future capital gains?

If they exceed $3,000 in a fiscal year
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Only in the event of a property foreclosure
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Indefinitely, to reduce future taxable income
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For up to 5 years following the loss
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Question 8 of 10

8. Question

What is the primary tax implication of installment sales in real estate?

Taxes are paid upfront based on the total sale price.
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Taxes on the sale are spread out over the period of installment payments.
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The seller pays no taxes on the installment sale.
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The buyer assumes the tax obligations of the installment sale.
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Question 9 of 10

9. Question

How does mortgage over basis impact taxation in real estate?

It triggers higher property taxes.
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The excess mortgage amount over the property’s basis is considered taxable income.
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It qualifies the property for a tax deduction.
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It reduces the capital gains tax on the sale.
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Question 10 of 10

10. Question

What is the tax treatment of debt relief in a short sale?

It is considered a charitable donation and is tax-deductible.
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It is not considered taxable income.
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The forgiven debt amount may be taxable as ordinary income.
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It reduces the seller’s taxable income by the amount of the debt forgiven.
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