3: Concepts of Home Ownership

The Ls sold their vacation home for $88,000. If they made a profit of 10 percent, what was the original cost of the property? a. $61,000 b. $79,000 c. $79, 200 d. $80,000

d. $80,000

Mr. and Mrs. H have been living in their condominium at the shore for the past 3 years and leasing to a tenant the house that they bought 25 years ago. When they sell their house, how much of the capital gain will be taxable? a. 0 percent b. 40 percent c. 50 percent d. 100 percent

d. 100 percent This relates to capital gains taxes. Capital gains taxes relate to a person's principal residence. It requires that they have lived in the property for two of the past five years, making (D) the correct answer as they get no capital gains tax advantage on a rental property.

M listed her real estate for sale at $100,000. If her cost was 80 percent of the listing price, what will her percentage of profit be if her real estate is sold for the listing price? a. 10 percent b. 15 percent c. 20 percent d. 25 percent

d. 20 percent

The philosophy behind an exchange is that a. income tax should not apply as long as a real estate investment remains intact b. a personal residence qualifies for tax deferment c. it increases depreciation deductions d. marital rights need not be released

a. income tax should not apply as long as a real estate investment remains intact

Which of the following types of development combines office space, stores, and residential units in a single community? a. mixed-use development b. manufactured housing park c. single unit development d. time-share community

a. mixed-use development

Most homeowner's insurance policies contain which of the following clauses? a. A property improvement clause b. A coinsurance clause c. A co-ownership clause d. A property devaluation clause

b. A coinsurance clause

A longer mortgage loan term will a. decrease the number of loans being made b. result in lower monthly mortgage payments c. prevent many individuals from owning homes d. cause interest rates to increase

b. result in lower monthly mortgage payments

In the event that a homeowner's insurance policy provides coverage for less than 80 percent of the full replacement cost of the dwelling, then the loss of the residence will be settle for a. the market value of the property less the land value b. the lowed repaid bid c. either the actual cash value or the prorated repair cost d. the total replacement cost

c. either the actual cash value or the prorated repair cost

A homeowner has insurance coverage that covers fire and water damage. If he wants to increase his coverage, the policy will protect which additional risk? a. hurricane b. war or nuclear explosion c. liability coverage d. volcanic eruption

c. liability coverage

Federal income tax regulations allow a homeowner to reduce his or her taxable income by amounts paid for a. repairs and maintenance b. hazard insurance premiums c. real estate taxes d. principal and interest

c. real estate taxes

The foremost consideration in the purchase of a home is its affordability. What is the second? a. construction specificatons b. the age of the improvements c. the location of the property d. the landscaping and exterior

c. the location of the property

The value that an owner has in the property that exceeds the amount of the mortgage debt is called a. equality b. escrow c. surplus d. equity

d. equity

Which of the following is NOT covered in a basic homeowner's policy? Damage caused by a. fire and lightning b. vandalism c. windstorm and hail d. flooding waters

d. flooding waters

The real cost of owning a home includes certain costs or expenses that many people overlook. Which of the following is NOT such a cost/expense? a. the income lost on cash invested in the home b. the interest paid on borrowed capital c. maintenance and repair expenses d. personal property taxes

d. personal property taxes