FinanceIntermediateDelaware Exam

What is a '1031 exchange' (like-kind exchange) in Delaware real estate?

AA program allowing homeowners to exchange primary residences

BAn IRS provision allowing investors to defer capital gains taxes by exchanging one investment property for another of like-kindCorrect

CAn exchange of two properties between adjacent Delaware neighbors

DA program for exchanging time-share interests

Why An IRS provision allowing investors to defer capital gains taxes by exchanging one investment property for another of like-kind Is Correct

Answer B: An IRS provision allowing investors to defer capital gains taxes by exchanging one investment property for another of like-kind

A 1031 (like-kind) exchange under Section 1031 of the IRS Code allows real estate investors to defer federal capital gains taxes when selling investment property by reinvesting the proceeds into a qualifying like-kind replacement property within specified timeframes.

Exam Tip: Finance

Finance questions often involve calculations. Master the T-bar method, understand the difference between conventional and government-backed loans, and know key ratios like LTV and DTI.

Key Finance Terms in This Question

1031 Exchange

A tax-deferred exchange allowing investors to sell one investment property and reinvest proceeds in a like-kind property while deferring capital gains taxes.

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Key Terms to Know

1031 Exchange

A tax-deferred exchange allowing investors to sell one investment property and reinvest proceeds in a like-kind property while deferring capital gains taxes.

Option Contract

A contract giving the buyer the right, but not the obligation, to purchase a property at a specified price within a specified time period.

Amortization

The gradual repayment of a loan through scheduled periodic payments that cover both principal and interest.

Adjustable-Rate Mortgage (ARM)

A mortgage with an interest rate that changes periodically based on a financial index, usually after an initial fixed-rate period.