RE questions set 3
What would the transfer tax be on the sale of a lot that sold for $10,500 with a loan assumed at $10,400? (a) 0 (b) 55 cents (c) $11.00 (d) None of the above
(a) 0 HINT:Transfer tax is paid on the difference between the selling price and any existing trust deeds that are assumed by the buyer in excess of $100. The first $100 is exempt.
What would the transfer tax be on the sale of a lot that sold for $9,800 with a loan assumed at $9,700? (a) 0 (b) 55 cents (c) $11.00 (d) None of the above
(a) 0 HINT:Transfer tax is paid on the difference between the selling price and any existing trust deeds that are assumed by the buyer in excess of $100. The first $100 is exempt.
The Street Improvement Act gives a property owner _______ to pay the special assessment tax before it goes to bond. (a) 30 days (b) 45 days (c) one month (d) 60 days
(a) 30 days HINT:He may pay all, part or none of it.
Mr. Furney is delinquent on his 2006-2007 real property taxes. The "sale to the state" took place on his property at the time prescribed by the law. Mr. Furney took steps in 2008 to pay his delinquent taxes. What is the proper procedure for Mr. Furney to redeem his property? (a) Make his payment, then receive and record a "comptroller's receipt," because the redemption period still applies (b) Make his payment and receive a tax deed (c) Record a "full tax payment and reconveyance" (d) Make his payment and record a tax clearance receipt
(a) Make his payment, then receive and record a "comptroller's receipt," because the redemption period still applies HINT:While the property is in a tax-defaulted status, the owner does not actually lose title and keeps possession for five years. If the taxes are not paid within that five-year redemption period a tax sale takes place, and the property may be sold at public auction to the highest bidder for cash.
A property was bought by Charlie and Liz. After the close of escrow, they discovered they were responsible for: (a) an increase in property taxes as a result of the sale, as well as the supplemental tax bill. (b) no increase in taxes, but a supplemental tax bill for the following year. (c) the former owner's back taxes. (d) paying two year's taxes in advance.
(a) an increase in property taxes as a result of the sale, as well as the supplemental tax bill. HINT:When property is sold, new taxes are assessed at 1.25% to 1.50% of the new purchase price. If the escrow closes during the time for which the seller has already paid the taxes, the new owner will receive a supplemental tax bill.
A supplementary tax bill indicates: (a) change in taxes as of the date of transfer of ownership of real property. (b) no change in ownership. (c) tax-deferred exchange. (d) new partnership.
(a) change in taxes as of the date of transfer of ownership of real property. HINT:Upon a change in ownership of real property, unless the change is between spouses, a new assessment is made based on 1% of the new purchase price. A supplementary tax bill will be sent to the new owner, reflecting the change in taxes as of the date of transfer.
Mr. Cheap, the owner of a duplex, leased one of the units for a two-year term beginning June 6, 1992, and received the rent for the last two months of the lease in advance. This prepaid rent should be: (a) declared in his income tax return for 1992. (b) declared in his income tax return for 1994. (c) pro-rated over the term of the lease. (d) none of the above
(a) declared in his income tax return for 1992. HINT:Must be reported in the year received.
Prepaid rent on a 5 year lease is taxable as income: (a) in the year collected. (b) in the year for which it is paid. (c) all of the above (d) none of the above
(a) in the year collected. HINT:Reported as income in the year in which it is collected.
Tax consciousness in relation to a real estate sale should be raised: (a) prior to the purchase. (b) at close of escrow. (c) at time of possession. (d) at time of sale.
(a) prior to the purchase. HINT:A buyer and seller should consider the tax implications prior to any contractual commitments.
A property was sold on these terms: selling price $25,000, $5,000 cash down payment, buyer to deposit proceeds of an $18,000 loan secured by a first trust deed and note, buyer to execute a note in favor of the seller for $2,000 secured by a second deed of trust. What amount of revenue stamps must be purchased prior to the recording of the deed? (a) $5.50 (b) $27.50 (c) $25.30 (d) None required on this transaction
(b) $27.50 HINT:He must pay transfer tax on the selling price of the house less any old loans assumed. There is no old loans assumed; therefore the tax is on the full selling price. $25,000 @ $1.10 per $1,000 = $27.50.
Smith owns a single family residence in which he resides. He trades with Brown for another residence which Brown is renting to a tenant. Both parties intend to use their newly acquired properties for rental income. Which of the following is true? (a) Smith can negotiate a tax-deferred exchange (b) Brown can negotiate a tax-deferred exchange (c) Both parties can negotiate a tax-deferred exchange (d) Neither can negotiate a tax-deferred exchange
(b) Brown can negotiate a tax-deferred exchange HINT:Brown is exchanging an income property for an income property; therefore, exchanging "like for like." Smith is NOT.
Concerning the second installment of property taxes, the due date and delinquent dates in California are: (a) November 1 and December 10. (b) February 1 and April 10. (c) July 1 and June 30. (d) January 1 and March 10.
(b) February 1 and April 10. HINT:The second installment of the property taxes is due February 1, and delinquent April 10.
Assume you own an apartment house. You have a swimming pool installed on the property at a cost of $19,200. For federal income tax purposes how would this be handled? (a) Write it off as an expense item (b) It would make an increase in your adjusted cost basis (c) It is not considered at all in the federal income tax program (d) It is considered a tax shelter
(b) It would make an increase in your adjusted cost basis HINT:Any improvements added by the property owner on income property would increase the cost basis of the property and would have to be adjusted accordingly for Federal Income Tax purposes.
Which of the following does not qualify for a tax-deferred exchange? (a) Commercial property (b) Personal residence (c) Residential income property (d) Land
(b) Personal residence HINT:A personal residence would not qualify as a "like" property in an exchange with investment property.
The buyer of a business, in order to avoid "successor's liability," must receive a clearance from the: (a) Alcoholic Beverage Control Board. (b) State Board of Equalization. (c) Secretary of State. (d) Real Estate Commissioner.
(b) State Board of Equalization. HINT:It is necessary to have a Certificate of Clearance from the State Board of Equalization to be sure the sales taxes have been paid.
In many states, taxes on real property are collected on an ad valorem basis. The term ad valorem most nearly means: (a) replacement value. (b) according to value. (c) fixed value. (d) utility value.
(b) according to value. HINT:Ad valorem is a Latin prefix meaning "according to value."
With certain exceptions, property taxes that have become a lien take priority over all other interests in real property: (a) if recorded first. (b) regardless of when they are recorded. (c) no action has been taken on previously recorded liens. (d) all of the above
(b) regardless of when they are recorded. HINT:A mechanic's lien has priority over any other liens filed (or recorded) with the exception of government liens (unpaid property taxes or special assessments).
A buyer is purchasing a single family residence for $163,000 and assuming an existing loan of $133,000. If the documentary transfer tax is computed on the basis of $.55 for $500, the amount of the tax will be: (a) $146. (b) $179. (c) $33. (d) $10.
(c) $33. HINT:To determine the amount of the documentary transfer tax, you need to first find out the amount of the new money in the transaction. To do this, you subtract any existing loan that the buyer is taking over from the sales price of the property. The amount of money left is the new money and is the amount on which the tax is computed.|$163,000 (purchase price)|- $133,000 (existing loan)|$ 30,000|$30,000 divided by $500 = 60|60 x $.55 = $33 (answer).
Which of the following would not be considered "like-kind" property under a 1031 Exchange? (a) Apartment building (b) Unimproved lot (c) Promissory note (d) Real property held for production of income
(c) Promissory note HINT:Section 1031 does not apply to exchanges of inventory, stocks, bonds, notes, or other securities or evidence of indebtedness. Properties are of like-kind, if they are of the same nature or character, even if they differ in grade or quality.
Which of the following is deductible each tax year for a personal residence? (a) New driveway (b) Depreciation (c) Property taxes (d) Maintenance
(c) Property taxes HINT:Certain expenses are deductible annually to homeowners, such as interest and property taxes on first and second homes.
The cost of capital improvements made to real property may be: (a) deducted yearly. (b) deducted every two years. (c) be added to the cost basis of the property when it is sold. (d) is usually added to the selling price of the property when it is sold.
(c) be added to the cost basis of the property when it is sold. HINT:The cost of capital improvements may be added to the cost basis when the property is sold.
Depreciation on real property is an allowable deduction for income tax purposes if the real property is: (a) owner's personal residence. (b) heavily encumbered. (c) improved. (d) all of the above
(c) improved. HINT:The only items that are allowable for depreciation on income tax are those items that are man-made or generally speaking, improvements, on income property.
Another name for a tax-deferred exchange is: (a) installment tax exchange. (b) tax sale exchange. (c) tax-free exchange. (d) sale exchange.
(c) tax-free exchange. HINT: The 1031 Exchange, sometimes called a "tax-free" exchange, is a method of deferring tax liability.
When commercial real estate is purchased today, the minimum period of time over which the owner can depreciate the improvements is: (a) 15 years. (b) 27 years. (c) 30 years. (d) 39 years.
(d) 39 years. HINT:Under current tax law, commercial real estate can be depreciated over a minimum of 39 years.
How many years does a taxpayer have to pay delinquent taxes before losing title to his or her property? (a) Two (b) Three (c) Four (d) Five
(d) Five HINT:While the property is in a tax-defaulted status, the owner does not actually lose title and keeps possession for five years. If the taxes are not paid within that five-year period, a tax sale takes place, the property may be sold at public auction to the highest bidder for cash, and time the owner loses possession and the buyer receives a tax deed.
Under federal income tax law, an individual may not deduct a loss on a sale of a home, unless: (a) the loss is greater than 20%. (b) the home is also used for business. (c) it was her primary personal residence. (d) bought as an investment and rented out.
(d) bought as an investment and rented out. HINT:The loss in the sale of residential income property may be deducted, subject to certain limitations.
When a city taxes the gross receipts of a broker's office, it is called: (a) use tax. (b) sales tax. (c) property tax. (d) business license tax.
(d) business license tax. HINT:Not a sales nor property tax, but a business tax on gross receipts.
The term "tax shelter" refers to: (a) mortgage relief. (b) real property taxes. (c) interest income. (d) income taxes.
(d) income taxes. HINT:The term "tax shelter" refers to a method of reducing your current income taxes.
All of the following are used to determine the gain or loss on sale of real property for income tax purposes, except: (a) miscellaneous costs of sale. (b) brokerage commission. (c) purchase price. (d) mortgage payment.
(d) mortgage payment. HINT:The owner's mortgage payment is not considered in the formula used to determine the gain or loss from the sale of real property.</
