Oregon 30-Hour Real Estate Law Practice Test

Which of the following would not be considered a tax benefit for investors?

1. Appreciation of property

2. Deduction of mortgage interest

3. Lease payments as expenses

4. Depreciation of property value

The correct answer is: Appreciation of property

Appreciation of property refers to the increase in the property's value over time. While this can yield significant financial gain upon selling, it does not directly provide a tax benefit in the same way that other options do. Tax benefits typically involve deductions or credits that can reduce taxable income, allowing for immediate tax savings. For investors, mortgage interest deduction allows them to deduct the cost of interest paid on their mortgage from their taxable income, which can significantly lower their tax liability. Lease payments as expenses can also be deducted, making them a means to offset income and reduce taxes. Depreciation, on the other hand, allows investors to deduct a portion of the property's value over time, reflecting wear and tear, further providing a tax benefit. In contrast to these options, appreciation does not directly impact the current tax situation until a property is sold, and even then, capital gains tax may apply to the profit earned from that appreciation. Therefore, appreciation is not considered a tax benefit for investors in the same immediate sense as the other choices.