Test your tax knowledge quiz on income and estate tax laws

This is another in a series of quizzes designed to "Test Your Tax Knowledge" on income and estate tax laws affecting the acquisition, construction, leasing, operation, financing and disposition of real estate. See how well you know the tax law affecting real estate by answering the following questions. The answers can be found at the bottom of the page: 1. Land Improvements (i.e. sidewalks, fences, outdoor lighting, landscaping, etc.) can be depreciated over a. 7 years b. 15 years c. 39 years d. Land improvements are not depreciable 2. True or False. Homebuilders must generally capitalize all direct and indirect costs incurred as part of the cost of the homes sold, but can deduct selling and marketing costs. 3. Which of the following financing costs is generally tax deductible in full at the time of a refinancing on a rental property? a. Mortgage brokerage commissions b. Mortgage prepayment penalty on existing mortgage c. Title insurance premiums d. Points 4. True or False. A purchaser who pays delinquent real estate taxes on the acquisition of real property can deduct the payment for real estate taxes in the year paid. 5. The due date for the annual NYS LLC Filing Fee Form is: a. January 31 b. March 15 c. April 15 d. None of the above 6. True or False. If a real estate owner sells property in 2007 and the sales proceeds are deposited with a qualified intermediary for an IRC Sec 1031 exchange, the owner can report the taxable gain in 2008 if the exchange fails and the proceeds are distributed to the seller in 2008. 7. If a decedent owned real property that was used in an active trade or business and certain other conditions are met, estate tax attributable to that real property can be paid:. a. Over 10 years b. Over 15 years c. Interest only for 5 years, balance over 10 years d. Interest only for 10 years, balance over 5 years 8. True or False. If a married couple qualified for the joint $500,000 exclusion on gain from the sale of a principal residence when the husband died in 2007, the surviving spouse will only be entitled to a $250,000 exclusion if she sells the principal residence in 2008 when her filing status is single. 9. An individual must normally own and occupy a principal residence for 2 out of 5 years to qualify for the $250,000/$500,000 principal residence gain exclusion. Which is an exception to the rule? a. Health reasons b. Employment change c. Unforeseen circumstances d. None of the above e. All of the above 10. True or False. Disallowed passive activity losses from rental real estate can be carried forward indefinitely to offset future passive income and are deductable in the year the property is disposed of. Michael Alderman, CPA, is a partner at Alderman & Company LLP, East Meadow, N.Y.