Arizona Real Estate Broker Exam — All Questions

Under Internal Revenue Code section 121, how much gain may a married couple filing jointly exclude on the sale of a principal residence?

• a.Up to $500,000✓
• b.Up to $750,000
• c.Up to $250,000
• d.Up to $1,000,000

Section 121 of the Internal Revenue Code excludes gain on the sale of a principal residence up to $250,000 for a single filer and up to $500,000 for a married couple filing jointly. The seller must have owned and used the property as a principal residence for at least two of the five years ending on the date of sale, and the full exclusion is generally available no more than once every two years.

After the 2017 federal tax act, what property still qualifies for a like-kind exchange under IRC section 1031?

• a.A principal residence sold and replaced within the same year
• b.Real property held for a trade, business or investment✓
• c.Any business asset, including equipment and vehicles
• d.Shares in a real estate investment trust held for investment

Since the 2017 Tax Cuts and Jobs Act, section 1031 deferral applies only to exchanges of real property held for productive use in a trade or business or for investment. Personal property such as equipment and vehicles was removed from the section. A principal residence is not held for business or investment, and interests in a REIT are securities, which section 1031 has always excluded.

What are the identification and completion deadlines in a delayed IRC section 1031 exchange?

• a.Ninety days to identify and three hundred sixty days to close
• b.Forty-five days to identify, one hundred eighty days to close✓
• c.Thirty days to identify and one hundred twenty days to close
• d.Sixty days to identify and two hundred seventy days to close

In a deferred exchange, the taxpayer must identify replacement property in writing within forty-five days after transferring the relinquished property, and must receive the replacement property within the earlier of one hundred eighty days after that transfer or the due date of the tax return, including extensions, for the year of the transfer. Both clocks start on the same day, and the one hundred eighty days is not an additional period after the forty-five.