California Real Estate Practice Exam

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Prepare for the California Real Estate Exam. Study with flashcards and multiple-choice questions, each question includes hints and explanations. Get ready to ace your exam!

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According to the IRS, who is considered a "dealer" in real property?

A person who holds interests in real property for investment
A person who holds interests in real property for production of income
A person who holds interests in real property for sale to customers
None of the above

The correct answer is: A person who holds interests in real property for investment

The definition of a "dealer" in real property, as specified by the IRS, refers to someone who engages in the business of selling real estate. The correct choice identifies a dealer as a person who holds interests in real property specifically for the purpose of selling it to customers. This differs significantly from an investor or a property holder who seeks to generate income through rentals or appreciates property value over time. In this context, holding real property for investment or for income production does not fit the IRS's definition of a dealer, as these actions indicate a more passive approach to real estate. A dealer is actively involved in buying and selling properties, making their activities more akin to that of a business rather than simply being an investor or landlord. This distinction is important for tax purposes, as dealers are subject to different rules regarding how their income is treated compared to investors.