Chapter 7- Special Income Tax Rules Applicable to Real Estate Chapter 7 –2. Any two income-producing business properties can be exchanged under the terms of Section 1031 of the Internal Revenue Code. (See the case in your course packet.)3. An involuntary exchange would be the seizing of a piece of land by the local government for a road, despite your objections. Or a fire. 4. For installment sale taxation, see the handout from class.6. For the main features of a 1031 exchange, see pages 72-82 of your course packet, or pages 123-127 of your text. Case Study 7.1 on page 125 is instructive.Selected chapter 7 objective practice questions: 1. The tax credit available for rehabilitation of certified historic structures amounts to (A) 20% of the cost of the building (B) 10% of the value of retained external walls (C) 20% of the rehabilitation costs if building is residential, 10% if commercial (D) 20% of the cost of qualified rehabilitation 2. To qualify for a low-income housing tax credit, the project must meet certain set-aside requirements generally defined as (A) 20 to 40 percent of the available rental units must be occupied by persons meeting low- income standards (B) set-aside requirements must be maintained for at 1east the first full year of occupancy (C) set-aside requirements may be waived after ten years (D) 50 to 60 percent of the available rental units must be occupied by persons meeting low- income standards 3. The low-income housing tax credit may be claimed on (A) all housing that is dedicated and occupied by low-income persons (B) only new construction that is occupied by low-income persons (C) only those expenditures that meet the requirements for qualified basis of a low-income housing project (D) only a project owner's income that exceeds $25,000 per year 4. To qualify a transaction as a tax-deferred exchange, all of the following requirements must be met except:(A) the property traded must be of like kind(B) the property traded can be either business property or personal use property (C) the exchange must occur between the principles involved (D) unlike property may be exchanged in the transaction but is subject to tax on the recipient5. In a tax-deferred exchange of real property, all of the following are classed as unlike property EXCEPT (A) cash (B) other property (C) out-of-state real property(D) net loan relief 6. The tax rules that apply to an installment sale are generally intended to allow (A) a deferral of all taxes until a final payment is made (B) the payment of taxes due as the money is received (C) an exclusion from capital gains taxes (D) a simplified method of calculating taxes due 7. If the holder of an installment note borrows money while the note is outstanding, the borrowed money is taxable as an installment payment if:(A) there are no other loans outstanding (B) the interest rate on the borrowed money exceeds that on the installment note (C) the amount borrowed exceeds the balance due on the installment note (D) the installment note is used as collateral for the loan 8. Interest charged on an installment note is subject to IRS adjustment for taxable income reporting to not less than which of the following? (A) the current market rate , (B) the monthly average U.S. Treasury bill rate (C) the bank imputed interest rate (D) the IRS determined Applicable Federal Rates 9. Generally, business 1osses cannot be deducted if they exceed the amount a taxpayer has at-risk, which is the sum of three of the following contributions to the business EXCEPT (A) borrowed money for which the taxpayer is not personally liable (non-recourse debt) (B) cash (C) the adjusted basis of other property (D) borrowed money for which the taxpayer is personally