Real Estate Investment

Which of the following examples illustrates the highest form of leverage?

$100,000 purchase price, 0% down payment.

The 2019 annual gift tax exclusion is how much per person, per donee?

$15,000

Which of the following statements is/are true regarding deductibility of property taxes on the Federal IRS return?

- As of Jan 1, 2018, State and Locale Taxes (SALT) including property taxes is capped at $10,000 for a married couple. - For businesses, property taxes are fully deductible - A buyer is allowed no deduction for back taxes paid to close a transaction

In general, a sole and separate ownership:

- Can be created by a Quitclaim deed from one spouse to another - May receive favorable tax treatment such as a veterans exemption - Is an inheritable estate.

an involuntary exchange?

- Condemnation by a governmental authority - Destruction by a hurricane - Property is seized by a foreign government

Using leverage can increase:

- Profits - Expenses - Risks

High leverage real estate transactions can include:

- carryback mortgages. - wraparound mortgages - sale-leasebacks

The 1986 Tax Act requires depreciation for non-residential real property to be taken over a period of

39 years

Which of the following would NOT be considered an involuntary exchange?

A gift from a relative

Which of the following is NOT a type of partnership per the Federal Uniform Partnership Act?

Corporation issuing stock

Real estate investments have all the following advantages Except:

Liquidity

Generally speaking, leverage is reflected in:

Loan to Value ratio.

Prior to attempting a market analysis, which of the following items must be determined?

Market area's boundaries

An acronym for the concept of leverage is

OPM

Income from a limited RE partnership is?

Passive income

Relating to real estate investment, "Sheltering" means:

Related to non-taxable or deferred income.

Real estate leverage is obtained:

With a mortgage.

Sweat equity is

a term describing personal time and effort.

All of the following are advantages of investing in real estate EXCEPT

acquiring highly liquid assets.

Real estate investment trusts (REITs)

act as investment conduits for small investors.

The concept of sustainability

affects government contracts, including leases.

In estimating a market value for a real estate investment, an evaluator would use all of the following appraisal principles EXCEPT

agglomeration.

The kind of increase in property value that results from scarcity and inflation is

appreciation

Subdivision and deed restrictions

are only as effective as the persons who enforce them.

All of the following items provide an indication of an area's current economic condition EXCEPT

area bank credit ratings with the Fed.

Under current depreciation rules, the number of years over which an asset can be depreciated depends on its

assigned cost recovery class

Increasing leverage can increase risk

because of increased debt service payments.

The expression "neutral leverage" means:

borrowed money reduces equity cash required but the interest rate paid equals the return on an investment

All of the following may be considered advantages of the corporate form of business EXCEPT

both corporate income and dividends are taxable

a capitalization rate

can indicate how well our money/investment is working for us.

The real estate market is an imperfect market and

each property is unique.

Active income includes all of the following EXCEPT

earnings derived from a rental property.

Market analysis is a process undertaken to accomplish all of the following activities EXCEPT

establishing the professionalism of the investor.

When analyzing the physical conditions of a building for investment, all of the following items should be considered EXCEPT

existing leases.

Each partner must file a tax return and each partner is liable for paying taxes on

his or her share of income whether or not received

When properties in blighted areas begin attracting investors, they are entering a period of

integration

Positive leverage occurs when the:

interest rate on the loan is less than the capitalization rate.

During the Great Recession, one of the most significant disadvantages to real estate investors with maturing loans was

lack of liquidity

From an investment standpoint, a major disadvantage of all real property is that it

lacks liquidity

Which of the following is NOT an income-tax related advantage to real estate investing?

leverage

A market analysis is predominantly done at the

local level

In developing a feasibility study, you attempt to determine the boundaries of the neighborhood. You look first for

natural and artificial boundaries.

All of the following demographics will aid in predicting the future success of a real estate investment EXCEPT

number of births to unmarried women in the area.

When an existing building is acquired, an allocation must be made between the value of the land and the value of the building because

only the building is eligible for depreciation

The ownership of a corporation is evidenced by

ownership of shares of corporate stock

An S corporation offers a special advantage not available to a regular C corporation, which is that it

pays no corporate tax

Betterments are an example of

preservation and enhancement of capital.

An investor in real estate should consider all of the following analysis aspects Except:

pride

You are interested in an investment that may appreciate in value and be a hedge against inflation with potential tax advantages. Of the following investments, which would meet your objectives?

real estate

You are interested in an investment that may appreciate in value and be a hedge against inflation with potential tax advantages. Of the following investments, which would meet your objectives?

real estate.

For tax purposes, capital gain is the difference between the property's adjusted basis of value and the

realized selling price

A seller's market can be defined as having a

short supply, high demand, and upward price movement.

In a joint tenancy ownership, survivorship specifies that upon the death of a co-owner the deceased's interest will automatically pass to the

surviving owners.

Which of the following statements is most accurate when applied to the purchase of real estate?

terms and conditions are generally negotiable

The Principle of Anticipation is typically applied to

the income approach to real property

All of the following items might be considered disadvantages of a general partnership EXCEPT

the partnership itself pays no income tax

To qualify a transaction as a tax-deferred exchange, what basic requirement is assumed

the property traded must be of like kind.

An oversupply of space results in low occupancy rates, which can be either technical or economic in origin. A technical oversupply occurs when

there are more available units than potential tenants.

Of the following investments, all typically provide an "income only" kind of return EXCEPT

unimproved land

In a feasibility study, you find what appears to be a high vacancy rate in new office properties. You investigate further to determine

whether there is a technical or an economic oversupply.

A California husband and wife own a property in their home in the form of community property. The husband dies and wills his entire estate to their only child. The property passes to the

wife and child as equal partners.