Chapter 21 Quiz

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Chapter 21 Quiz

Real Estate Taxes & Tax Aspects of Real Estate Ownership

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The compulsory taxes the government imposes against benefiting property owners for street improvements or road repairs are called:

1 point

(A) special excise taxes.

(B) special assessments.

(D) capital gains tax.

Clear selection

Property taxes may be increased or decreased by adjusting the:

1 point

(A) assessed value.

(B) tax rate.

(D) Neither of the above is correct.

Clear selection

A town may recover the costs of curbs or sidewalks by:

1 point

(A) a state income tax.

(B) a sewer assessment.

(D) a personalty tax.

Clear selection

Setting aside or allowing a fixed sum of money each year to offset replacement or improvements when needed. 21-435

1 point

Straight-Line Depreciation

Assessment Taxes

Qualified Intermediary

Special Assessments

Clear selection

The 1986 Tax Reform Act permits a homeowner to deduct which of the following when filing a federal tax return?

1 point

(A) Mortgage amortization.

(B) Property taxes.

(D) All of the above.

Clear selection

Property received in a 1031 Exchange.

1 point

Relinquished Property

Installment Contract

Assessment Taxes

Replacement Property

Clear selection

A sale of property, usually at auction, for non-payment of assessed taxes. 15-335

1 point

Capital Gain

Tax Sale

Depreciation

Ad Valorem

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The federal income tax law allows an investor to gradually write off his original investment. What method is used?

1 point

(A) Exchanges.

(B) Installment buying.

(D) Land contract.

Clear selection

The gain on the sale of a capital asset such as real estate. 21-434

1 point

Ad Valorem

Tax Sale

Depreciation

Capital Gain

Clear selection

Depreciation on a property:

1 point

(A) represents an out-of-pocket expense to an investor.

(B) is a reduction against income taxes.

(D) is not recaptured when the property is sold.

Clear selection

Which of the following would NOT be considered a capital improvement?

1 point

(A) Installation of a new roof.

(B) Replacement of the furnace.

(D) Repair to central air conditioning unit.

Clear selection

If you pay $5,000 in mortgage interest and you are in the 28% tax bracket, how much can you deduct against taxable income?

1 point

(A) $1,400.

(B) $1,080.

(D) $5,000.

Clear selection

An assessment generally made against only those specific parcels of realty directly benefiting therefrom. 21-433

1 point

Relinquished Property

Special Assessments

Assessed Valuation

Assessment Taxes

Clear selection

To qualify for a depreciation deduction for income tax purposes, the property must be:

1 point

(A) improved.

(B) unencumbered.

(D) old.

Clear selection

Alex purchased an apartment building in 1994. For tax purposes, he may depreciate the building over what period of time?

1 point

(A) 15 years.

(B) 27.5 years.

(D) 39 years.

Clear selection

An assessment of property values by the government for the purpose of taxation. 21-431

1 point

Special Assessments

Assessment Taxes

Assessed Valuation

Installment Contract

Clear selection

A couple buys a residence for $80,000. During the first year they have expenses of $4.100 in mortgage interest, $4,500 in real property taxes, depreciation of $3,300 and fire insurance of $520. They also added a guest room for $6,400. Deductions on their tax return for the year will be:

1 point

(A) $6,120.

(B) $8,600.

(D) $1,500.

Clear selection

A seller who sells his principal residence must have occupied the house for at least what period of time to avoid paying taxes on the gain up to the allowable limit?

1 point

(A) Six months.

(B) 12 months.

(D) 24 months.

Clear selection

Which of the following statements concerning exchanges in real property is true?

1 point

(A) They are Eilways tax-free.

(B) Tax must be immediately paid on any gain.

(D) They are unlawful.

Clear selection

Within 180 days of relinquishing a property, the exchanger must:

1 point

(A) identify the replacement property.

(B) report the exchange to the IRS on Form 8824.

(D) take title to the replacement property.

Clear selection

A contract that provides for payment of a purchase price in installments. 21-437

1 point

Installment Contract

Assessed Valuation

Replacement Property

Assessment Taxes

Clear selection

A charge against real estate made by a unit of government to cover the proportionate cost of improvements. 21-433

1 point

Assessed Valuation

Special Assessments

Installment Contract

Assessment Taxes

Clear selection

If a $300,000 office building is built on a lot that cost $75,000, what is the amount of straight-line depreciation the first year?

1 point

(A) $7,692.

(B) $10,909.

(D) $13,636.

Clear selection

In regard to senior citizen tax reductions in New Jersey:

1 point

(A) the senior citizen must occupy the property to qualify.

(B) the reduction is $50 per year.

(D) the senior citizen would not qualify if income exceeds $5,000 per annum.

Clear selection

Which of the following is NOT an allowable expense deduction on an income-producing property?

1 point

(A) Depreciation.

(B) Maintenance costs.

(D) Interest expense.

Clear selection

In a 1031 Exchange, the property that is transferred.

1 point

Special Assessments

Replacement Property

Installment Contract

Relinquished Property

Clear selection

The investor’s down payment represents:

1 point

(A) debt.

(B) capital gain.

(D) passive loss.

Clear selection

Local government programs and services are financed primarily through:

1 point

(A) federal income taxes.

(B) state income taxes.

(D) property taxes.

Clear selection

A house valued at $205,000 is assessed at 80% of value. If the tax rate is $5.40 per $100, the monthly taxes will be:

1 point

(A) $738.00

(B) $822.00

(D) $997.97

Clear selection

Loss of value brought about by physical deterioration or functional or economic obsolescence. 22-447

1 point

Tax Sale

Depreciation

Assessment Taxes

Capital Gain

Clear selection

In Thelma’s last will and testament, she devised a house to her daughter, Louise. After the death of Thelma, if Louise decides to sell the property, the cost basis for tax purposes will be:

1 point

(A) Thelma’s adjusted basis at the time the gift was made.

(B) Thelma’s adjusted basis, after adjusting for inflation.

(D) the market value of the property at the time of the sale.

Clear selection

Additional consideration of unlike property included in a 1031 Exchange to equalize the value of property exchanged. 21-436

1 point

Boot

Basis

Assessment Taxes

Depreciation

Clear selection

Which of the following is NOT an eligible tax deduction on a personal residence?

1 point

(A) Discount points paid by a purchaser.

(B) Depreciation.

(D) Mortgage interest.

Clear selection

Original cost of property plus value of any improvements put on by the seller and minus any depreciation taken. 22-443

1 point

Basis

Tax Sale

Special Assessments

Boot

Clear selection

If the quarterly taxes on a property are $1,750 and the assessed value is $22,000 for the land Eind $80,000 for improvements, what is the tax rate per $100?

1 point

(A) $5.42

(B) $6.86

(D) $8.35

Clear selection

A specifically formed company that facilitates a 1031 Exchange by transferring the relinquished property and acquiring a replacement property. 21-437

1 point

Special Assessments

Assessment Taxes

Straight-Line Depreciation

Qualified Intermediary

Clear selection

Tax according to valuation. 21-431

1 point

Ad Valorem

Capital Gain

Tax Sale

Assessed Valuation

Clear selection

Which of the following statements is NOT true regarding capital gains treatment on a personal residence?

1 point

(A) Single persons filing a tax return are entitled to a $250,000 exclusion.

(B) Married filers are eligible for a $500,000 exclusion.

(C) Homeowners must have owned and occupied the property as their residence for at least three of the five years immediately preceding the sale.

(D) There is no limit on the number of times the exemption may be used as long as eligibility requirements are met.

Clear selection

Which of the following is taxable at the time of an exchange?

1 point

(A) The value of the property over the basis

(B) The unadjusted basis

(D) Nothing is taxable in an exchange.

Clear selection

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