1. Jim, a US individual who qualifies as a real estate professional, purchases a certain rental real estate property in 2014 and leases it out producing a taxable loss each year from 2014-2017. Jim has no other passive income during any of these years. He sells the real estate in 2017 at a gain. Jim can deduct the taxable losses as ordinary deductions generated from her rental activity in 2017, the year that he sold the rental real estate, and will recognize capital gain income on the sale under Section 1231.

True False

2. Passive losses that are limited on an individuals income tax return in one year can be carried forward and deducted in future tax years.

True False

3. When condominiums are sold in the ordinary course of business by an individual, the income earned from the sale of the condo will be taxed as the capital gain tax rate.

True False

4. Jane holds land with a tax basis of $100,000, but a fair market value of $500,000 (the land appreciated over several years). Jane donates the land to a qualified charitable organization. Jane must recognize the $400,000 gain and will be allowed to take a $500,000 charitable deduction for the value of the contribution.

True False

5. The requirements to treat a transaction as a nontaxable Section 1031 exchange includes that the property must be held for investment, for productive use in a trade or business or as dealer property held for sale to customers in the ordinary course of a trade or business.

True False

6. When property is inherited, the tax basis carries over to the heirs.

True False