Real Estate Transfer of Property
Jon paid $100,000 cash for a lot and constructed a $500,000 income property on the lot. The construction was financed by paying $100,000 cash and a $400,000 loan at 8% annual interest secured by a lien against the property. How much can Jon depreciate on future income tax returns?
Jon can depreciate it $500,000 on future income taxes returns.
Which of the following would cause a grant deed to be invalid at its inception:
Legal incompetence of the grantor.
Which type of policy will cover everything?
No policy covers all risks. Title insurance policy is a policy that protects a buyer against errors or omissions or defects in the title of the property.
Ralph sold his house to Oscar, who did not record the deed, but took residency there. Ralph then sold the same property to Larry, who reviewed the county recorder's records, but did not examine the property. Ralph gave Larry a deed, which Larry recorded. Which of the following would be true concerning title to the property?
Oscar maintains title. First to possess or record gets the property.
Which of the following is required for a valid deed?
Property description
Until the land contract is paid in full, what is the status of the purchaser's interest in the property?
Purchaser has equitable title in the property.
Which of the following deeds would least likely contain implied covenants by the grantor?
Quitclaim deed
When a project is "turn key" is said to be:
Ready for occupancy.
A deed of conveyance contained only the following guarantee: "This property was not encumbered during the time the grantor owned it except as noted in this deed." What type of deed did the grantor give to the grantee?
Special warranty. A special warranty deed is a deed in which the grantor warrants only against defects occurring during their ownership.
Stephen, his nephew, and his niece are joint tenants. Stephen sells his interest to his sister, and then his nephew dies. As a result, which of these statements is TRUE?
Stephen's niece and the man's sister are tenants in common.
The buyer of a commercial property under a sale/leaseback arrangement would be least concerned with:
The depreciated book value of the building
Which of the following best describes earnest money?
The money deposited by the purchaser at the time of signing the earnest money or sales contract. To demonstrate that the applicant is serious and willing to demonstrate an earnest of good faith about wanting to complete the transaction
There are several differences between an extended coverage policy of title insurance and a standard coverage policy of title insurance. Which of the following is insured under the extended policy, but not under the standard policy?
The possibility that some improvements on the insured property are located on adjoining land. Extended policy covers improvements on adjoining land.
Which of the following would cause a license to cross a private property to terminate?
The property was sold would cause a license to cross a private property to terminate.
What item will appear as a debit on the buyer's closing statement?
The purchase price.
The IRS (Internal Revenue Service) would define marginal tax rate as:
The tax rate which is used for the next dollar of taxable income
"Intestate succession" occurs when:
There is no will
Which is true about restrictive covenants?
They are placed by private parties in a deed.
Which is true about restrictive covenants?
They are placed by private parties in a deed. Restrictive covenants are most commonly associated with subdivisions and community management associations and are intended to maintain consistency within the neighborhood.
Which of the following provides a buyer with the best assurance of clear, marketable title?
Title insurance provides the best assurance of marketable title.
the primary purpose of a deed is to:
Transfer title rights
If a developer wants to build a commercial building closer to the street than is permitted by the local zoning ordinance because the shape of the lot makes a standard setback impossible, the developer should seek a
Variance
In which of the following situations would property be reassessed?
When Sold
"Boot" is a term used in a 1031 Exchange when which of the following happens?
When there is a difference between the equity of properties being exchanged.
In a settlement statement, the selling price ALWAYS is
a debit to the buyer
The selling price on a buyer's closing statement is treated as:
a debit to the buyer.
Which of the following is a means of transferring title from one party to another?
a deed
A recorded legal document that gives constructive notice that an action affecting a certain property has been filed in court is called:
a lis pendens
Which of the following deeds contains no expressed or implied warranties?
a quitclaim deed
All of the following are variances EXCEPT
a retail store in a residential neighborhood
Which of the following would be used to clear a defect from the title records?
a suit to quiet title. A owner might bring a "quiet title" action to correct a minor mistake in the property description or to remove an easement that's been unused for years.
The recorded history of matters that affect the title to a specific parcel of real property is called a(n):
abstract of title. Abstracts give an at-a-glance history of all the recorded documents associated with a property, including changes in title, liens, mortgages taken out and paid off, transfers through death and so forth.
Sam owned a triplex valued at $160,000 with an adjusted basis of $70,000. King owned a duplex valued at $155,000. Both properties were owned free and clear. They exchanged their properties, with King giving Sam $5,000 in cash. For federal income tax purposes:
am has a recognized gain. Boot refers to cash, or other dissimilar property that is utilized to balance out the equities of the properties being exchanged.
Three years after signing a five-year lease, business A outgrew its rental space. Business A would like business B to take on the responsibility of the lease for the remaining two years. B can do this through
an assignment. An assignment is a legal term used in the context of the law of contract and of property. In both instances, assignment is the process whereby a person, the assignor, transfers rights or benefits to another, the assignee.
A title insurance policy will protect a buyer from financial losses that are caused by:
an unrecorded easement to which the policy has taken an exception
To determine property taxes on a residence:
assess land and improvements separately, then multiply the total by one tax rate. Land and improvements are added separately and then multiplied by one tax rate.
What is required if personal property is used as consideration in the purchase of real property?
bill of sale
An example of involuntary alienation of property is
condemnation.
the unadjusted basis of a taxpayer's residence would be:
cost. For federal income tax purposes in determining gain or loss on real property, the term "unadjusted basis" most nearly means "original cost"
The covenant in a deed which states that the grantor is the owner and has the right to convey the title is called:
covenant of seisin
On a closing statement in a typical real estate transaction, the buyer's earnest money deposit is reflected as a
credit to the buyer and a debit to the seller.
Prepaid insurance and tax reserves, in which the buyer assumes the mortgage, will appear on a typical closing statement as a
debit to the buyer and a credit to the seller
On a settlement statement, the cost of the lender's title insurance policy required for a new loan is usually shown as a
debit to the buyer. A settlement statement is a document that summarizes all of the fees and charges that a borrower and lender face during the settlement process of a loan transaction.
On a settlement statement, prorations for real estate taxes paid in arrears are shown as a
debit to the seller and a credit to the buyer.
The donation of private land for public use is called:
dedication
When private property is abandoned, the state may acquire title to that property under the right of:
escheat
The term "boot" would probably be considered in connection with
exchange. Boot received is the money or the fair market value of "other property" received by the taxpayer in an exchange.
When a real estate broker speaks of "tax shelter" he/she is referring to:
income tax
If Joe dies without having made the will, it is said to be
intestate
An installment sale represents a tax advantage because:
it defers payment of capital gains. An installment sale allows the taxpayer to postpone the receipt and reporting of income tax to future years when his/her other income may be lower. Thus, a taxpayer can avoid paying the entire tax on the gain in the year of sale
According to income tax laws, which of the following is true about depreciation of land?
land is not depreciated
When the grantor does not wish to convey certain property rights, he or she:
may note the exceptions in the deed of conveyance.
When the grantor does not wish to convey certain property rights, he or she:
may note the exceptions in the deed of conveyance. Most commonly known as "restrictive covenants," such deed restrictions are often used to maintain the consistency of a neighborhood
Personal income taxes are structured using rates that are:
progressive. Progressive means the more you make, the more you pay. It might also be termed "graduated."
A mechanic's lien would be properly classified as a(n):
specific lien
When a claim is settled by a title insurance company, the company acquires all rights and claims of the insured against any other person who is responsible for the loss. This is known as what?
subrogation.
A deed to convey property would be SIGNED by:
the grantor. The "grantor" is the one conveying the property, so he or she signs the deed.
To rehabilitate real property usually means
the property will be restored to a good condition.
The right of alienation is defined as
the right to transfer an interest in real property. Alienation (property law) In property law, alienation is the voluntary act of an owner of some property disposing of the property, while alienable is the capacity for a piece of property or a property right to be sold or otherwise transferred from one party to another.
Voluntary alienation refers to
voluntary alienation. A transfer of real property through one's intentional actions. a sale or gift.
Mrs. Johnson owned an income property with an adjusted cost basis of $150,000 and a fair market value of $200,000. She exchanged the property for another income property which had a fair market value of $210,000. Both properties had no loans against them and no adjustments were made for the differences in value. For federal income tax purposes, the new property will have a basis for Mrs. Johnson of
$150,000 the Cost Basis of the old property being sold will be the same as Cost Basis of the new property being acquired.
Which of the following documents is usually prepared when a real estate buyer also purchases a seller's riding lawn mower?
A bill of sale
The construction of a family room, additional bedroom, and extra bath has been completed on the owner's home. Before the addition can be used, which of the following is TRUE?
A certificate of occupancy must be issued.
Recorded title to a parcel of real property was vested in Jill Martinez, a single woman. After her marriage to Josh Cohen, she executed a deed to the property only in the name of Jill Cohen, a married woman. The discrepancy in the grantor's name:
A defect which may cause a cloud on the title
Under the federal Lead-Based Paint Hazard Reduction Act, which statement is TRUE?
A disclosure statement must be included with all sales contracts and leases involving residential properties built prior to 1978.
Which of the following instruments proves a marketable title?
A general warranty deed stipulates that the ownership being conveyed is free of any hidden liens, encumbrances or other claims.
What is a will written and executed entirely in the handwriting of the testator?
A holographic will is a written will and executed entirely in the *handwriting* of the testator. A written will is usually typed.
A buyer would want which of the following removed from a preliminary title report:
A mechanic's lien
Roberto owns an apartment building and wants to exchange his property in a 1031 tax deferred exchange in order to defer paying taxes in the year of the exchange. He could exchange his apartment building for:
A more valuable apartment building, exchanging loans and paying money to the other party to equalize the values.
What is the difference between a general lien and a specific lien?
A specific lien is a lien against a certain parcel of real estate, while a general lien covers all of a debtor's property.
A riparian owner owns land which borders on:
A stream
Although a title insurance policy does cover the risk of loss for many reasons, which of the following risks is not covered in a title insurance policy?
A zoning ordinance, regulation or plan. No policy will cover everything, an example of this would be zoning.
What is the opposite of "alienation?"
Acquisition. Alienation of title is the conveyance of title. The opposite is acquisition of title
An acknowledgment may be taken by a notary public who is:
An employee of a corporation who has executed an instrument being acknowledged, if he is not personally interested. Acknowledgement is done by a notary. A notary is a public figure authorized to attest to the signing of documents, such as deeds or mortgages.
An agreement wherein one party agrees to reimburse the other party for damages suffered in the event of a clearly defined risk, in exchange for payment of monetary consideration, is commonly known as
An insurance policy.
A special warranty deed differs from a general warranty deed in that the grantor's covenant in the special warranty deed:
Applies only to a definite limited time. Under a special warranty deed, an owner transfers property guaranteeing the quality of title only during the period of his or her ownership, leaving subsequent buyers vulnerable to prior claims.
One who is authorized to perform certain acts for another under a power of attorney would be a:
Attorney in fact
A written instrument which passes title of property, such as furniture purchased as a part of a home sale, from seller to buyer would be a:
Bills of Sale is a written instrument which passes title of personal property, such as furniture purchased as a part of a home sale, from seller to buyer.
What do liens and easements have in common?
Both are encumbrances.
When a prospective buyer makes a written purchase offer that the seller accepts, then the:
Buyer receives equitable title to the property.
In order to avoid successors liability in the buying of a business which of the following should be filed?
Certificate of clearance
In making the decision of whether or not to issue a title policy, the title insurance company would be most concerned with those documents that appear within the:
Chain of title. Chain of title is the history of all of the documents that transfer title to a parcel of real property, starting with the earliest existing document and ending with the most recent.
The list of previous owners of conveyance from whom the present real estate owner derives his or her title is known as the:
Chain of titles
In order for an agreement for a transfer of real property to be binding on the buyer and seller it must:
Contain an offer and acceptance
Which of the following would alienate title to property:
Conveying title
A title company could make a title search by searching the records of the:
County Recorder's, Federal Land and County Clerk's office
What is the meaning of a quiet title action:
Court action to remove a cloud on the title
In a settlement statement, how will a proration of prepaid water, gas, and electric charges be reflected?
Debit to the buyer and a credit to the seller
Which of the following would be an example of "boot," for income tax purposes:
Debt relief from a mortgage in the exchange. Boot refers to cash, or other dissimilar property that is utilized to balance out the equities of the properties being exchanged.
A deed:
Does not have to be recorded to transfer title
When a governmental body takes private real property for necessary public use, certain legal processes must be followed. Such a taking is an exercise of the right of:
Eminent domain
Title to real property can be acquired by an individual by all of the following methods, except:
Escheat
The main purpose of a deed is to:
Evidence of the change in title or transfer of an interest in real property
Which of the following terms BEST describes personal property that, by its attachment to real property, is regarded as real estate?
Fixtures
The recording of a deed
Gives constructive notice of the ownership of real property.
A quitclaim deed to a parcel of real property conveys only the present interest, right and title of the:
Grantor. The "grantor" is the one conveying the property, so he or she signs the deed.
As one of the qualifications for a depreciation deduction for income tax purposes, the real property must be:
Improved. An Income property owner is allowed to take depreciation deductions on his property, but in order to qualify for this type of deduction, he must have made some kind of improvement or improvements to the property in question.
Robert often refers to tax shelters when discussing properties. Robert is primarily referring to:
Income Taxes
Which of the following would not be subject to property tax:
Intangible personal property
When an owner sues the government to get them to take his property this is known as:
Inverse condemnation. Inverse condemnation is a term used in the law to describe a situation in which the government takes private property but fails to pay the just compensation
