Quiz 20: Income Taxation and Value


Operating expenses are generally deductible for income tax purposes in the year they are paid. Capital expenditures are added to the tax basis of a property, treated like a separate building, and expensed through annual depreciation deductions. Tax benefits, like other cash flow benefits, have higher present values when they are received sooner rather than later.

We are asked to choose the appropriate solution from the given options to complete the given statement. Taxable income from the rental of actively managed depreciable real estate is classified as Passive income. The correct answer is option B. Passive income. Passive income is an earning that an individual makes from a rental.

Discount points are fully deductible in the year in that the loan obligation has been disposed. That occurs because all up-front financing costs are amortized over the life of the loan. When the loan is paid in full, before the loan terms call for discharge, the remaining up-front financing costs are deductible.