Ch 12 Chapter Summary

Question 1

1099-S Reporting

Answer 1

An escrow agent is required to report each sale of real property to the IRS using Form 1099-S.

Question 2

8300 Reporting

Answer 2

If an escrow agent receives more than $10,000 in cash, she must report it to the IRS using Form 8300.

Question 3

FIRPTA

Answer 3

The Foreign Investment in Real Property Tax Act requires 15% of amount realized from the sale to be withheld if the seller is not a U.S. citizen or resident alien.

Question 4

California withholding law

Answer 4

In some sales of property located in California, state law requires an escrow agent to withhold 3.33% of the total sales price for state income taxes.

Question 5

RESPA

Answer 5

The Real Estate Settlement Procedures Act is a federal law that requires lenders and closing agents to disclose information about closing costs to home buyers.

It applies to federally related loan transactions, a category that includes most residential transactions.

Question 6

Kickback

Answer 6

A kickback is a fee paid for a referral.

RESPA prohibits referral fees between settlement service providers in federally related loan transactions.

Question 7

Closing disclosure

Answer 7

Under both TILA and RESPA, the lender must provide a prospective borrower with a loan estimate, and if the transaction proceeds to closing, the borrower and seller must receive a closing disclosure.

The closing disclosure shows the actual closing costs (as opposed to estimated costs) in a settlement statement format.