Chapter 18 Income Tax Issues In Real Estate Transactions Flashcards Preview

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Flashcards in Chapter 18 Income Tax Issues In Real Estate Transactions Deck (17):
1

What are the Seven tax brackets for federal income tax?

10,25,28,33,35,39.9 percent.

2

According to the tax law the age 59 1/2 rule allows first time homebuyers to do what?

Use IRA distributions to fund up to 10,000 or 20,000 for couples to buy build or rebuild and pay reasonable closing cost for their first home.

3

What are permitted deductions?

Points

4

What is Capital Gains?

The profit realized from the sale of any capital investment including real estate.

5

When does a short term capital gain happen?

Within the first year

6

When does a long term Capital gain happen?

Over one year

7

On a long term capital gain the capital gains tax is what?

15 percent when the taxpayers income is in the 25-35 percent income brackets and 20 percent when the taxpayers income is in the 39.6 percent income bracket.

8

When does Capital Loss occur?

When an investment or other types of property are sold at a loss.

9

What is the Basis of a property?

It’s cost

10

What is a Adjusted Basis?

The original cost or other Basis plus certain additions and minus certain deductions such as depreciation and casualty losses.

11

What are the three classifications of income?

Active income,portfolio income, passive activity income.

12

Explain Active income?

Salaries or earned through a business in which the taxpayer actively participates.

13

Explain Portfolio income?

Interest,annuities dividends and royalties

14

Explain Passive activity income?

Invested funds (rent)

15

When the gain is the difference between the selling price and the adjusted basis the depreciation part of the gain is taxed as capital gain. What is this process called?

Recaptured depreciation

16

A tax deferred exchange (1031 exchange) allows a individual to do what ?

Allows a individual to defer capital gains taxes on real estate brought and sold for investment purposes.

17

What is a eligible property for a 1031 exchange ?

Must be like kind