Real Estate Principles Unit 11

Tax consequences with respect to real estate should be known

Virtually all important decisions affecting tax liability must be made before a transaction in negotiated. At any other time, it may be too late.

An owner occupied residence qualifies for a homeowner's exemption of

$7,000

The maximum nontaxable amount that can be given as a gift to one donee, in one year, is currently

A gift is a voluntary transfer by an individual of any type of property for less than full consideration. The giver is the donor; the recipient of the gift is the donee. No gift tax return need be made on a gift to one donee, in one year, of a present interest valued, as of 2013, at $14,000 or less. (A married couple could give $14,000 each, for a total of $28,000 to one donee in one year.) For every year after that, the maximum gift allowed before a gift tax return must be made will be $14,000 per donee plus an adjustment for inflation, although the exclusion will remain at $14,000 for 2014. If the gift is a future interest, a return always must be made.

Which of the following can a property owner expect after sewer lines are installed in front of his/her property?

A special assessment is a tax imposed against only those specific parcels of realty that will benefit from a proposed public improvement, as opposed to a general tax on the entire community.

The second property tax installment is delinquent after

April 10

Unless an extension is given, a federal income tax return must be filed for the preceding tax year by

April 15

A buyer does not have to withhold a portion of the sales price from a seller when

California Withholding on the Sale of Real Property: Effective January 1, 2003, buyers must withhold and transmit a portion of the sales price to the Franchise Tax Board (FTB) regardless of whether the seller is a California resident, unless an exemption applies. Buyers must withhold 3 1/3 percent of the gross sales price on sales of California real property interests when:1) the seller is an individual (a "natural person") (Rev. & Tax Code SS 18662(e)(1)); or2) the seller is not an individual and the funds will be transferred to a seller with a last known street address outside of California or to the seller's financial intermediary. (Rev. & Tax Code SS 18662(f)(1)). The exemptions for individuals selling real property include the sale of property for less than $100,000, the sale of a principal residence, an IRC SS 1031 exchange, an involuntary conversion under IRC SS 1033, and the sale of property at a loss for California income tax purposes.

If a property owner believes that the assessed value on his or her property has been set too high, the owner could file a request to seek a reduction from the

Each county has an Assessment Appeals Board to which an individual can question their property's value set by the assessor.

Real property taxes become a lien on

January 1

Real property taxes become a lien on

January 1st.

A manufactured (mobile) home can be either personal property or real property. As personal property, a manufactured home is subject to

Manufactured (mobile) homes can be either personal property or real property. As personal property, a manufactured home is subject to vehicle license fee status. Vehicle license fee status means that title to the manufactured home is registered with the Department of Housing and Community Development (HCD). If treated as real property, a manufactured home is subject to local real property taxation

The first property tax installment of the tax year is due on

November 1

Which of the following is true regarding current federal estate tax law?

The American Taxpayer Relief Act of 2012 established a federal estate tax exemption of $5 million per person, indexed for inflation. The estate is taxed at a 40% rate on any estate value over that amount. The exemption was $5.25 million for 2013 and is $5.34 million for 2014. The exemption is reduced by any large gifts (those subject to gift tax) made during the decedent's lifetime.

The California sales tax is a(n)

The California State Sales Tax is imposed upon retailers for the privilege of selling tangible personal property at retail.

Recognizing that many older people on fixed incomes have trouble paying property taxes, the Property Tax Postponement Law was passed to allow

The Property Tax Postponement Law allows a senior citizen (person aged 62 or older) to postpone payment of taxes on his or her personal residence. Postponement also may be made by persons who are blind or disabled, as defined in the law

If Johnson's intent is to accomplish a "tax free" exchange of his apartment building, he should exchange for

To be a tax-deferred exchange, as defined in Section 1031 of the Internal Revenue Code, the properties exchanged must be of like kind in nature or character. Most real property can be exchanged for other real property, such as an office building for vacant land. Property held for personal use cannot be exchanged for investment property; for example, a personal residence cannot be exchanged for a house that will be rented.

A principal residence must be occupied for how long to take advantage of the maximum exclusion of profit from taxable income?

Two years

The second property tax installment is due and delinquent on

You must know the fiscal tax year for the state exam.Memorization Aid: No, Darn, Foolin, Around November 1: First installment due December 10, 5 PM: Delinquent date for 1st installment February 1: Second installment due April 10, 5 PM: Delinquent date for 2nd installment

In California, the inheritance and gift taxes have been

abolished

Taxes charged in direct relation to property value are

ad valorem taxes

In computing transfer tax, the consideration paid for the property excludes

any preexisting liens or encumbrances

A personal residence and business equipment are considered

capital assets

The person responsible for determining assessed values is the

county assessor

A way to spread the cost of acquiring property used in a trade or business over its useful life that is a deduction from adjusted gross income describes

depreciation

The purpose of the property tax assessed value is to

establish the base value

An investor can take advantage of all of the following EXCEPT

homeowner's exemption from federal income tax.

Which of the following is a tax consideration for the homeowner?

mortgage interest deductions, tax credits, capital gains exclusion

Which of the following is considered an ad valorem tax?

real property tax.

Tax delinquent residential real property not redeemed by the owner during the five year statutory redemption period is deeded to the

state