REAL 5090 FINAL EXAM REVIEW 2026
QUESTIONS AND CORRECT ANSWERS UGA
REAL ESTATE INVESTMENT STUDY GUIDE
Exchange one property for another that has different cash flow
characteristics
Exchange one property for several properties to be more diversified
Exchange one property for another that is less management-intensive
What happens in an exchange when the new property has more equity than
the exchanged property? What if the equity is less? - CORRECT ANSWER-
No gain is recognized on the year of exchange but the depreciable basis will
be less and when it is sold, the gain on sale will usually be greater because
of the lower basis
If equity is less, then it results in an unlike property, like persona property,
and property must be recognized as a gain in the year of sale
What is the basis in a property acquired through a 1031 exchange called? -
CORRECT ANSWER-Substitute Basis
,What is the main disadvantage for a 1031 exchange? - CORRECT
ANSWER-Loss in depreciable basis
How soon must he seller identify a new exchange property for a 1031? How
soon must the seller close on the new property? - CORRECT ANSWER-
within 45 days
within 180 days
What are two types of exchanges? - CORRECT ANSWER-Reverse and
Improvement exchanges
Income taxes will or will not also be paid at the time of sale? If the property
is held for more than 1 year, any increase in the sale price compared to the
purchase will be taxed at a preferential rate, what is that rate called? -
CORRECT ANSWER-Will also be paid
Capital gains tax
Are typical operating expenses tax deductible? Why or why not? In order to
be deductible, what needs to be done? - CORRECT ANSWER-The typical
operating expenses such as incurred each year should all be tax deductible.
This is due to the fact that real estate is a business investment and business
expenses are deductible.
, In order to be deductible, the property must have income to be offset by the
expense
What is the cost basis equal too? - CORRECT ANSWER-Purchase price
adjusted for transaction costs
Renovations (capital expenditures) that add to the value of the properties
and cannot be immediately expensed
Depreciation, which reduces the cost basis
Is land depreciable and Tax deductible? - CORRECT ANSWER-Neither
What are the times for depreciation for Residential and Non-Residential
properties? - CORRECT ANSWER-Non-residential - Straight Line over 39
Years
Residential - Straight Line over 27.5 years
What is depreciation recapture?
What is the rate generally? - CORRECT ANSWER-- Depreciation
recapture is repayment of income tax not paid during ownership.
- The rate is generally 25%.
QUESTIONS AND CORRECT ANSWERS UGA
REAL ESTATE INVESTMENT STUDY GUIDE
Exchange one property for another that has different cash flow
characteristics
Exchange one property for several properties to be more diversified
Exchange one property for another that is less management-intensive
What happens in an exchange when the new property has more equity than
the exchanged property? What if the equity is less? - CORRECT ANSWER-
No gain is recognized on the year of exchange but the depreciable basis will
be less and when it is sold, the gain on sale will usually be greater because
of the lower basis
If equity is less, then it results in an unlike property, like persona property,
and property must be recognized as a gain in the year of sale
What is the basis in a property acquired through a 1031 exchange called? -
CORRECT ANSWER-Substitute Basis
,What is the main disadvantage for a 1031 exchange? - CORRECT
ANSWER-Loss in depreciable basis
How soon must he seller identify a new exchange property for a 1031? How
soon must the seller close on the new property? - CORRECT ANSWER-
within 45 days
within 180 days
What are two types of exchanges? - CORRECT ANSWER-Reverse and
Improvement exchanges
Income taxes will or will not also be paid at the time of sale? If the property
is held for more than 1 year, any increase in the sale price compared to the
purchase will be taxed at a preferential rate, what is that rate called? -
CORRECT ANSWER-Will also be paid
Capital gains tax
Are typical operating expenses tax deductible? Why or why not? In order to
be deductible, what needs to be done? - CORRECT ANSWER-The typical
operating expenses such as incurred each year should all be tax deductible.
This is due to the fact that real estate is a business investment and business
expenses are deductible.
, In order to be deductible, the property must have income to be offset by the
expense
What is the cost basis equal too? - CORRECT ANSWER-Purchase price
adjusted for transaction costs
Renovations (capital expenditures) that add to the value of the properties
and cannot be immediately expensed
Depreciation, which reduces the cost basis
Is land depreciable and Tax deductible? - CORRECT ANSWER-Neither
What are the times for depreciation for Residential and Non-Residential
properties? - CORRECT ANSWER-Non-residential - Straight Line over 39
Years
Residential - Straight Line over 27.5 years
What is depreciation recapture?
What is the rate generally? - CORRECT ANSWER-- Depreciation
recapture is repayment of income tax not paid during ownership.
- The rate is generally 25%.
