Question

I appreciate your help!

1. Generally, if the owner of an IRA dies before beginning required minimum distributions, the designated beneficiary must:

A. Take the entire amount in lump-sum in the year after the year of death.
B. Take the required minimum distributions for the years after the year of death.
C. Take the entire amount within five years after the year of death.
D. Begin to take the required minimum distributions when the beneficiary turns 70½.

2. James, who lives in Texas, is searching for like-kind replacement property for his investment-use unimproved land. Each of the following is qualified like-kind property EXCEPT:

A. An office building located in California.
B. An apartment building located in Oklahoma.
C. A 25-year lease of unimproved land in Texas.

Answer 1

Q1. Answer is B.

The rules suggests: Regardless of the type of IRA one inherits, they must generally take out at least a minimum annual amount over a certain period- these are known as RMDs (Required Minimum Distributions). If you fail to, you can be subject to a whopping 50% penalty on the amount you should have withdrawn. The method being followed here is known as the "5 year rule."

Q2. Answer is B.

Any real property held for productive use in a trade or business or for investment can be considered “like-kind” property. It refers to the nature of the property and not the quality. Basically, real-property exchanged for like kind real property.

Properties must be held for business or investment purposes but do not need to be similar in grade or quality. Therefore, option B does not fit the criteria.