Chabot College
Fall 2007
Course Outline for Real Estate 87
REAL ESTATE TAXATION AND EXCHANGES
Catalog Description:
87 – Real Estate Taxation and Exchanges
3 units
Tax aspects of real estate transactions as they affect buyers and sellers. Aspects of real estate
marketing that deal with exchanges. Laws pertaining to real estate taxation that affect exchange
opportunities. Prerequisite: Real Estate 80. 3 hours.
Prerequisite Skills:
Before entering this course, the student should be able to:
1. identify each of the steps and stages in a typical residential home sale;
2. list the services that a real estate agent provides to home buyers;
3. distinguish between real property and personal property;
4. list the three major methods used to describe land in legal documents.
5. describe the methods of holding title;
6. define the term “easement”;
7. list the different types of categories into which zoning ordinances divide a community;
8. define the term “eminent domain”;
9. explain the statute of frauds;
10. define the term “listing agreement”;
11. describe the agency relationship;
12. recall the four essential elements of value;
13. recognize the purpose and importance of an MAI appraisal;
14. differentiate between a “Seller’s” market and a “Buyer’s” market;
15. compare the advantages of renting to the advantages of buying;
16. solve capitalization problems using the capitalization approach to value.
Expected Outcomes for Students:
Upon completion of this course, the student should be able to:
1. identify circumstances warranting a tax deferred exchange;
2. explain the purpose for a tax deferred exchange;
3. specify the legal references involved with a tax deferred exchange;
4. list the sections of the Internal Revenue Tax Code which govern tax deferred exchanges;
5. organize a time line showing events comprising the exchange process;
6. express the fundamental aspects of an exchange in an understandable manner;
7. describe a (PLR) private letter ruling and state it’s importance.
Course Content:
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Adjusted basis for determining gain or loss
Basis of property: cost
Basis of property included in inventory
Basis of property acquired from a decedent
Basis of property acquired by gifts and transfers in trust
Adjustment of basis
Exchange of property deed for productive use or investment
Involuntary conversions
Introduction to exchanges
Prequalifying people, properties and potential exchanges
Income tax considerations of exchanges
Depreciation as a factor in exchanges
Effects of 1964 tax law changes
Chabot College
Course Outline for Real Estate 87, Page 2
Fall 2007
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Tax basis and adjusted tax basis after the exchanges
The exchange contract
Installment sales
Home trade-in plans
Deductions for capital gains
Alternative tax
Limitation of capital assets
Capital loss carry over
Definition of capital assets
Holding period of property
Property used in the trade or business and involuntary conversions
Dealers in securities
Real estate property subdivided for sale
Amortization in excess of depreciable property
Gain from sale of certain property between spouses or between an individual and a controlled
corporation
29. Gains from disposition of certain depreciable property
30. Rate of tax
31. Taxable gifts
Methods of Presentation:
1. Lecture
2. Guest lectures
3. Case discussion
Assignments and Methods of Evaluating Student Progress:
1. Typical Assignments
a. Research likely properties for Tax Deferred Exchange Treatment and explain how that
particular market has changed in the past real estate cycle as depicted in Chapters 1 & 2.
b. Explain why a real estate buyer may purchase “out of state” property after fully depreciating a
high value California portfolio. Show examples to support your findings.
c. Identify the leading tax advantages of owning residential investment real estate in an upward
moving real estate equities market. How would such an investment compare to pure stock
“equities” as an investment? Explain and be prepared to discuss in class.
2. Methods of Evaluating Student Progress
a. Examinations
b. Assignments
c. Final Examination
Textbook(s) (Typical):
Real Estate Investment and Taxation, Stephen D. Messner, Prentice-Hall, 2005
Special Student Materials:
None
JM/Sept2006
Revised 10/13/06, 11/3/06
RE87