Who wants to be taxed as a real estate professional

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Reference no: EM132188768

1. Provide the tax that would be applied for each of the following: 1. Withholding tax on passive-type income (interest, dividends, etc..) for non-US investors with respect to US source income. _______________. 2. Tax imposed on a foreign corporation based on a deemed distribution of US branch operations____________________. 3. Withholding tax on US business income income that is effectively connected with a United States trade or business. ______________.

2. Which of the following would cause the largest problem for an individual who wants to be taxed as a real estate professional (which one would be the most difficult to overcome if an individual wanted to be treated as a real estate professional)?

A. The individual owns only rental real estate properties and spends all of his/her time managing them.

B. The individual works for herself as a commissioned real estate broker and invests in one rental property on the side.

C. The individual works full time for a company that is active in a real estate trade or business (periodically requiring overtime) but has no ownership in the company.

D. The individual owns and operates a hotel where she spends 2,000 hours per year and she also invests in a small portfolio of rental real estate properties.

E. None of the above would cause problems for an individual to be classified as a real estate professional.

3. Jenny is a US individual who qualifies as a real estate professional. She purchases a commercial rental real estate property in 2016 and leases it out. The taxable net loss from the property was ($5,000) in 2016. Jenny’s only other source of income or loss was $3,000 of interest income from a loan. She sells the real estate in 2017 at a $10,000 gain. How much taxable income and loss should Jenny report in each of the following tax years:

2016 ____________________ 2017 ____________________

Reference no: EM132188768

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