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Exam 20: Income Taxation and Value

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Question 21

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The value of a property can be thought of as having two components,a land component and a building component.Since the land component of the original cost basis is not depreciable,it is important to understand how much of the property's value is typically attributed to the land for tax purposes.As a general rule,the value of land constitutes what percentage (expressed as a range) of the total value of a commercial property?

A) 0% to 10%
B) 10% to 30%
C) 30% to 50%
D) 50% to 70%

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Question 22

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Current tax law allows investors to take tax credits for the cost of renovating or rehabilitating older or historic structures and for the construction or rehabilitation of qualified low-income housing.Which of the following statements regarding tax credits is true?

A) A $1 tax credit reduces the investor's tax liability by an amount dependent on the individual's income tax bracket.
B) A $1 tax credit reduces the investor's tax liability by $1.
C) A $1 tax credit increases the investor's taxable income by $1
D) A $1 tax credit has exactly the same impact on an investor's tax liability as a tax deduction.

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Question 23

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The benefit of being classified as a capital gain is that the income is subject to a tax rate that maxes out at 15%,which may be well below the tax rates associated with depreciation recapture income and ordinary income for a particular investor.In order to qualify for the lower capital gain tax rate,the property being sold must be held for more than:

In a like-kind exchange,property owners must meet a number of conditions in order to be eligible to take advantage of this tax deferment.One criterion is for the exchange to be between "like-kind" properties.Which of the following exchanges represents an example of an eligible "like-kind" exchange?

There are three main types of income subject to federal taxation.Which of the following types of income includes income generated from rental real estate investments?

When an investment appreciates in value during the investment holding period,the appreciation is generally taxed at which of the following rates?

Given the following information,calculate the taxes due on sale for the following fully taxable sale.Net Sale Proceeds: $1,500,000,Adjustable Basis: $830,000,Depreciation Recapture: $150,000,Capital Gain Tax: 15%,Depreciation Recapture tax: 25%.

U.S.tax law is designed to raise revenues for the operations of the federal government and to promote certain socially desirable real estate-related activities.Tax legislation is combined into a single section of the federal statutory law commonly referred to as:

Limited liability companies (LLCs) and limited partnerships are preferred to corporate ownership structures because these forms of ownership allow investors to obtain limited liability and avoid the double taxation faced by corporations.This tax benefit can be extremely important as the maximum capital gain rate for corporations remains at (as of 2012) :