ch 17 quiz real estate principles

This form of syndication avoids double taxation but has a lack of centralized management. Which form fits the description?

The General Partnership AND The Joint Venture

Alexandra and Marita have formed a REIT. They have their investors and resources and are ready for business. The REIT will be investing in an assorted portfolio of real estate and mortgage investments. What type of REIT have Alexandra and Marita formed?

A Combination Trust

What is the correct order of regulatory agency jurisdiction changes to non-corporate California real estate syndicates since The Real Estate Syndicate Act's inception in 1970?

The Department of Corporations, The California Department of Real Estate, The Department of Corporations The Real Estate Syndicate Act, under the California Business and Professions Code, went into effect in 1970 and handed the jurisdiction of some non-corporate syndicates from the Department of Corporations to the Department of Real Estate. The Real Estate Syndicate Act was repealed 8 years later, again turning the regulation of ALL REITS to the Department of Corporations, where it remains.

Marita tells Alexandra they must obtain their broker-dealer license from the Department of Corporations to engage in the sale of real estate syndicate security interests. Alexandra disagrees with Marita, explaining they both have their broker licenses and that is sufficient. Who is correct and why?

Alexandra is correct. Section 25206 was added to the Corporations Code making obtaining a broker-dealer license optional. In 1977, Section 25206 was added to the Corporations Code, permitting real estate brokers to engage in the sale of real estate syndicate security interests without having to obtain a broker-dealer license from the Department of Corporations.

Marita and Alexandra set up a Limited Partnership. Marita is named General Partner and Alexandra is named Limited Partner. Marita embezzles funds from the investors. Is Alexandra liable for Marita's indiscretion?

Alexandra is only liable if she is named as a general partner in the certificate or if she participates in control of the business. The California Revised Limited Partnership Act says that a limited partner is not liable as a general partner unless that limited partner is also named as a general partner in the certificate of limited partnership or if that limited partner participates in control of the business. So, since Alexandra is not a General Partner, she is not liable.

This form of syndication allows limited liability for the investors but has negative tax features. Which form fits the description?

The Corporate Form The Corporate Form of syndication allows for both centralized management and limited liability for the investors but has negative tax features that make it unappealing for modern syndicates.

Alexandra and Marita are forming a real estate syndicate. They have their initial investments and are ready to proceed. What happens next?

Origination, Operation, Completion or Liquidation

This is the most frequently used organizational form for real estate syndicates. Which form fits the description?

The Limited Partnership The Limited Partnership offers the Corporate Form's advantages of limited liability and centralized management and the General Partnership Form's tax advantages, resulting in the Limited Partnership being one of the most frequently used organizational forms for real estate syndicates.

A small group of investors are in the initial stages of putting together a real estate investment trust (REIT). Which of the following is not a qualification?

The company must distribute at least 85% or more of its income to its shareholders. One of the legal mandates that must be fulfilled to meet the qualifications for a trust is that the company must distribute at least 90% or more of its income to its shareholders. The REIT must also be owned by at least 100 investors, no five or fewer of whom may hold more than 50% of the interests, and with each share carrying an equivalent vote.

Alexandra and Marita's company has qualified as a trust. It has distributed 96% of its income to its shareholders. Which earnings require the payment of federal taxes?

The company only pays federal taxes on the retained earnings, which are taxed at corporate rates. If a company meets the qualifications for a trust by distributing at lease 90% or more of its income to its shareholders, then that company does not pay federal taxes on that distribution but only on the retained earnings, which are taxed at corporate rates.