Special Problems in Real Estate Taxation - 15 CPE Credit Hours
Course description and objectives: This course is designed to survey selected “hot” topics having a direct impact on the property owner and investor. The emphasis is on problem areas where the unwary beginner and expert alike can be trapped. You will learn to identify dangers involving installment sales, imputed interest, exchanging, equity participation, condemnation, passive loss rules, and transactions with foreign investors.
Completion Deadline & Exam: This course, including the examination, must be completed within one year of the date of purchase. In addition, unless otherwise indicated, no correct or incorrect feedback for any exam question will be provided.
Course Level: Overview. This program is appropriate for professionals at all organizational levels.
Field of Study: Taxes
Prerequisite: General understanding of federal income taxation.
Advanced Preparation: None
Learning Assignments & Objectives
As a result of studying each assignment, you should be able to meet the objectives listed below each assignment.
Chapter 1 Tax Economics
At the start of Chapter 1, participants should identify the following topics for study:
* Financial fundamentals and tax planning elements
* Taxable income
* Tax-free income
* Tax-deferred income
* Tax-sheltered income
After reading Chapter 1, participants will be able to:
1. Define building an estate, preserving wealth and distributing assets in the context of financial fundamentals and tax planning elements.
2. Identify examples of the four types of income, from a financial and tax perspective, to be budgeted into cash so that income-producing assets can be acquired and managed for an effective investment plan.
3. Recognize at least five types of fringe benefits that employers can provide to employees tax-free.
4. List four basic budget rules, four ways that cash can be used, six basic guidelines that should be applied when purchasing assets and six basic management rules.
After studying the materials in Chapter 1, answer the exam questions 1 to 8.
Chapter 2 Installment Sales & Time Value of Money
At the start of Chapter 2, participants should identify the following topics for study:
* Installment method
* Imputed interest
* Real property sales & casual sales of personality
* Related party sales
* Like-kind exchanges
* Contingent payments or price
* Dealer dispositions
* Installment obligations in excess of $5 million
* Dispositions of installment obligations
After reading Chapter 2, participants will be able to:
1. Recognize the importance of the installment method, locate at least three requirements set forth in §453 to determine whether the installment method may be used, and define basic terminology associated with using the installment method.
2. Define the impact of §483 (imputed interest rules) and §§1271 through 1274 (original issue discount rules) on installment sales.
3. List the rules associated with real property sales and casual sales of personality, the superstructure of provisions associated with the related party rules of §453 and the exceptions that override basic installment planning.
4. Identify how the contingent payment sales have changed due to the Installment Sales Revision Act of 1980, name other contingent payment rules, and list circumstances when dispositions of installment obligations occur.
After studying the materials in Chapter 2, answer the exam questions 9 to 23.
Chapter 3 Mortgage Finance
At the start of Chapter 3, participants should identify the following topics for study:
* Mortgage costs
* Interest deduction
* Interest-free & below-market rate loans
* Imputed interest & OID
* Shared appreciation mortgages
* Tax treatment overview
* Types of equity participation debt
* Tests to determine what constitutes interest
* Option & conversion rights
* Convertible indebtedness
After reading Chapter 3, participants will be able to:
1. Outline mortgage financing and identify two advantages and one major disadvantage of mortgage financing, noting how to amortize mortgage costs appropriately.
2. Define interest using Deputy v. DuPont, 308 U.S. 488, and state the key aspects of personal interest, investment interest, prepaid interest, and points.
3. Recognize interest-free or below-market interest rate loans and how they relate to lenders’ interest income and borrowers’ interest paid under §7872.
4. Identify long-term financing techniques and six characteristics of a shared appreciation mortgage and their bearing on lenders and borrowers.
5. List three basic tests that determine what constitutes interest and their effect on the tax treatments of equity participation, and define equity participation debt noting where changes may be necessary in tax planning.
After studying the materials in Chapter 3, answer the exam questions 24 to 37.
Chapter 4 Home Sales & Like-Kind Exchanges
At the start of Chapter 4, participants should identify the following topics for study:
* Home sales under §121
* Special rules for ownership & use requirements
* Prorata exception
* Three elements of like-kind exchanges
* Related party exchanges
* Like-kind requirement for personal property
* Multiple asset exchanges
* Identification requirements for delayed exchange regulations
* Actual & constructive receipt rule for delayed exchange regulations
* Exchanges of partnership interests
After reading Chapter 4, participants will be able to:
1. Outline the key elements of the $500,000 home sale exclusion showing how to apply it, and identify the three safe harbor regulations associated with the home sale exclusion.
2. List the advantages of exchanges, three basic requirements and at least three basic types of true exchanges under §1031, and state the rules of boot noting their effect on like kind exchanges.
3. Recognize the regulations for related party exchanges, foreign real property exchanges and personal and multiple property exchanges, and name the codification systems and state how they relate to exchanged depreciable tangible properties.
4. Identify the regulations for delayed (deferred) exchanges, list four safe harbors that can be used without risk of actual or constructive receipt, and define partnership interests that may be exchanged under §1031 and those that may not.
After studying the materials in Chapter 4, answer the exam questions 38 to 49.
Chapter 5 Involuntary Conversions
At the start of Chapter 5, participants should identify the following topics for study:
* Threat of condemnation
* Property voluntarily sold
* Condemnation award
* Severance damages
* Special assessment withheld from an award
* Gain or loss from condemnations
* Postponement of gain
* Replacement period