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40 Cards in this Set
- Front
- Back
- 3rd side (hint)
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The term boot is the name used for a factor arising in which of the following? |
Capitalization Depreciation Discounting Exchanging |
Exchanging |
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The primary responsibility for reporting a real estate transaction to the IRS is on the |
escrow company. lender. real estate agent. parties. |
escrow company. |
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A real estate licensee would relate 'boot' to |
depreciation. income tax and exchanging. amortization. capitalization. |
income tax and exchanging. |
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A property owner of specified qualified low income housing sells the property and reinvests the proceeds in similar housing within one year. With respect to capital gains, this owner |
must pay full capital gains tax as they have not resided on the property for the minimum of two years. may be exempt from capital gains as long as similar housing is purchased. will only be taxed on 50% of the gain. may exclude 75% of the gain. |
may be exempt from capital gains as long as similar housing is purchased. |
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Increase in value over a period of time which will affect the capital gains to be paid upon sale is known as |
appreciation. cash flow. unearned increment .boot. |
appreciation. |
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Cost recovery is a term most closely related to |
depreciation. capitalization. amortization. adjusted basis. |
depreciation. |
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Stepped Up Basis, which refers to the sale of a property that has been inherited and then sold, means that gain taxation will be assessed: |
on the difference of the value of the property when purchased as of the date of death of the testator. on the adjusted basis of the deceased. |
on the difference of the value of the property when purchased as of the date of death of the testator. |
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'Boot' is the name used for a factor arising in which of the following cases? When depreciating property for tax purposes Where there is a difference between the equity of properties being exchanged |
I only Both I and II II only Neither I nor II |
II only |
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For income tax purposes, which of the following types of property can be depreciated? |
A peach tree orchard An owner-occupied farmhouse Vacant land A single-family residence |
A peach tree orchard |
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Mary Martin owns two single family homes. She wants to sell one of the homes but does not want to pay capital gains. Under what circumstances could she sell without paying capital gains? |
She may sell both properties without paying capital gains if they have been owned for a minimum of two years. She may sell either home as long as she has owned the home for five years. She must sell the home that is her principal residence if she has owned and lived in it at least two of the last five years. None of the above. |
She must sell the home that is her principal residence if she has owned and lived in it at least two of the last five years. |
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Which of the following would not be considered like properties under a 1031 tax exchange? |
A resort for a strip mall An office building for a warehouse An unimproved lot for timber A hotel for a motel |
An unimproved lot for timber |
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A net gain on an asset is the amount: subject to capital gain taxation. remaining after capital losses are deducted from capital gains. |
A only B only Both A and B Neither A nor B |
Both A and B |
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For income tax purposes the brokers commission would be itemized on the sellers tax return as a |
capital expenditure. sales expense. deduction from cost basis. capital loss. |
sales expense. |
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California state income tax brackets and the standard deduction are adjusted each year based upon the |
federal tax brackets and standard deduction. New York Stock Exchange. Prime rate. California Consumer Price Index. |
California Consumer Price Index. |
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For income tax purposes, what is a persons marginal tax rate? |
Tax rate on next dollar of income earned The difference between federal and state income tax The lowest tax bracket established by law Tax rate on capital gains |
Tax rate on next dollar of income earned |
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In federal income tax accounting, how would a capital improvement be treated? |
The cost of the improvement is deferred until sale. A deduction from the net income would be taken in the year the improvement was completed. The cost of the improvement is added to the cost basis and depreciated according to IRS schedules. None of the above. |
The cost of the improvement is added to the cost basis and depreciated according to IRS schedules. |
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The amount of profit exempt from capital gains taxation on the sale of a personal residence is |
$300,000 whether single or married. $250,000 if single and $500,000 if married at the time of the sale. $150, 000 for a single taxpayer and $300,000 for a married couple. All capital gains are taxable. |
$250,000 if single and $500,000 if married at the time of the sale. |
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Which of the following types of property can be depreciated? |
A vacant lot Undeveloped industrial land An apartment building A principal residence property |
An apartment building |
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Which of the following are income tax advantages of owning an apartment building? |
Depreciation is deductible Capital gains may be deductible over a number of years An exchange may be tax free All of the above |
All of the above |
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A homeowner may take advantage of an exclusion from capital gains on the sale of their principal residence |
every two years. every five years. once in their lifetime up to $500,000. There is no exclusion. |
every two years. |
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Mr. and Mrs. Alexander paid $16,776 during the tax year on an interest only note secured by a mortgage held by Wells Fargo Bank. How much can be deducted from their income? |
There is not enough information given to know Up to $10,000 None of it All of it |
All of it |
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A gain is considered taxable when |
the property is sold. the property is substantially improved. the property is reassessed. the property has appreciated. |
the property is sold. |
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John Campbell purchased four acres in 1970 for $5,000 per acre. He subdivided the lots into four parcels and sold them in 2005 for $70,000 each. What was his capital gain? |
$65,000 $260,000 $275,000 $300,000 |
$260,000 |
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Lance and Jennifer Mitchell purchased a home in 1999 for $350,000 and sold it in 2005 for $750,000. On how much of the capital gain will they pay taxes if no improvements have been made to the home? |
$150,000 $250,000 Nothing $400,000 |
Nothing |
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Which of the following items are tax deductible by the owner of a condominium? |
Mortgage interest on the loan for the unit purchased Cost of repairs Assessments of the homeowners association for roof replacement All of the above |
Mortgage interest on the loan for the unit purchased |
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Pertaining to the use tax law, which of the following statements is the most accurate? The purchaser of personal property will be liable for use tax even if he/she only buys one property. State sales taxes are exempt from the use tax law. |
B only A only Both A and B Neither A nor B |
B only |
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Mr. and Mrs. Capital purchased an income property for $3,800,000. The property appraised for $3,900,000 and was tax assessed at $3,700,000. If the Capitals put $1,000,000 down for the property and financed the balance, the basis for income tax purposes would be |
$2,800,000. $3,700,000. $3,800,000. $3,900,000. |
$3,800,000. |
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In the sale of a business, sales tax would be paid on which of the following? |
Trade fixtures and furniture Inventory of goods on hand Accounts receivable Blue Sky |
Trade fixtures and furniture |
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All of the following are considered capital improvements or expenditures when determining adjusted basis EXCEPT |
installing an automatic sprinkler system. replacing a broken window. adding a bedroom. remodeling a kitchen |
replacing a broken window. |
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In order to qualify for an exclusion from capital gain on a residential property, the homeowner must |
have both owned and occupied the property for two of the previous five years .file for the exclusion on a 1099-S. have owned the property free and clear of all encumbrances. have deducted mortgage interest for at least two years. |
have both owned and occupied the property for two of the previous five years |
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A method in which an equal portion of a structures value is deducted each year is known as |
straight line depreciation. incurable depreciation. accrued depreciation. double entry depreciation. |
straight line depreciation. |
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Under current law, a qualified taxpayer may exclude the entire gain on the sale of his/her principal residence up to _______________if filing a single return. |
$250,000 $300,000 $400,000 $500,000 |
$250,000 |
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Bernard Penoro sold his apartment building under an installment sales agreement. The advantage of this method of sale is the ability to |
choose what year to declare the gain. postpone declaring any gain until the contract has been paid in full. declare the gain at the time of the sale .pro-rate the capital gain over the term of the installment contract. |
pro-rate the capital gain over the term of the installment contract. |
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The withholding of income tax liability of an independent contractor licensee is that of |
the brokerage at the time of disbursement of commission monies. the brokerage on a monthly basis on the total commissions received for that period. the escrow agent at the time of closing. the licensee. |
the licensee. |
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One of the most important factors in trade, business or investment properties is that the IRS allows the owner to claim an annual expense for loss of market value of the improvements due to |
variable expenses. capital expenditures. depreciation. appreciation. |
depreciation. |
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On which of the following would a capital gain or loss be applied for income tax purposes? |
Mortgaging property Liquidated damages on a breached contract Market value change at the date of sale Discounts accrued on short term notes |
Market value change at the date of sale |
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A homeowner may deduct from income tax liability |
condominium assessments. uninsured losses to property. capital loss if the home is sold for less than the adjusted basis. depreciation on the home. |
uninsured losses to property. |
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Jeff Smith is the owner of a condominium unit which he occupies as his principal residence. For income tax purposes, which of the following may not be deducted? |
Maintenance Assessments for the common areas Depreciation None of the above are deductible |
None of the above are deductible |
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Sean O'Brien just sold his home which was purchased 18 months ago at a sales price of $185,000. His adjusted basis is $170,000. He will pay 6% in sales commissions and $3500 in closing costs. For federal income tax purposes, what is the amount of Sean's capital gain? |
$0 $400 $3900 $11,100 |
$400 |
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If less than 100% of the sales price is received in the year of sale, the tax code considers it to be a(n) |
1031 Exchange. investment sale. tax free transaction. installment sale. |
installment sale. |
