Chap 18 Flashcards
A development company purchased 1,000 acres of land from a foreign seller for $2,850,000. Federal law requires the buyer to withhold from the seller and pay to the IRS approximately
A) $28,500. B) $285,000. C) $42,750. D) $427,500.
15% which is D The answer is $427,500. The IRS requires that buyers withhold 15% of the gross sale price. The buyer must report the purchase and pay the IRS the amount withheld.
he just value of a homesteaded property in Leon County is $425,800. The Consumer Price Index for the previous year was 2%. The property’s just value increased the maximum allowed under the Save Our Home Amendment. By what percentage did the just value increase?
A) Percentage passed by the residents of Leon County B) Percentage increase approved by the county commissioners C) 3% D) 2%
The answer is 2%. The just value of homesteaded property may be increased either 3% annually (based on the assessed value for the previous year) or by the percentage change of the Consumer Price Index for the preceding year, whichever is less
A homesteaded single-family residence has an assessed value of $92,800. The owner is a 25% service-disabled veteran who is 75 years of age. What is the total homestead tax exemption?
A) $50,500 B) Totally tax exempt C) $30,000 D) $55,000
Explanation
The answer is $55,000. The solution is $50,000 homestead exemption + $5,000 disability = $55,000 total homestead tax exemption.
An investor purchased a commercial building in January for $524,900. The contract specified that 80% of the purchase price be allocated to the structure, and the remaining purchase price be allocated to the land. What is the annual depreciation deduction? (Round to nearest dollar.)
A) $13,459 B) $3,817 C) $10,767 D) $15,270
Explanation
The answer is $10,767. $524,900 × .80 = $419,920 building. $419,920 ÷ 39 years = $10,767.
Tax advantages of homeownership do NOT include
A)
exclusion of gain from the sale of a principal residence up to $500,000 for a single adult.
B)
up to $10,000 in penalty-free withdrawals from an IRA if used as a down payment on a personal residence for first-time homebuyers.
C)
a tax deduction of property taxes paid.
D)
a tax deduction of the interest paid on a home equity loan that does not exceed $100,000.
Explanation
The answer is exclusion of gain from the sale of a principal residence up to $500,000 for a single adult. The IRS allows an exclusion of up to $250,000 of gain ($500,000 for married couples filing a joint return) realized on the sale of a principal residence.
Which item is NOT a deductible expense for an income-producing property?
A) Depreciation B) Reserve for replacement C) Mortgage interest D) Hazard insurance
Explanation
The answer is reserve for replacement. Reserve for replacement is not a cash expense and therefore is not deductible.
Which statement is FALSE regarding property taxes?
A)
Ad valorem tax means according to value.
B)
Property taxes become a lien on all real estate in Florida on January 1 each year.
C)
The county property appraiser assesses all real property within the county.
D)
Property taxes for the previous year are due on November 1.
Explanation
The answer is property taxes for the previous year are due on November 1. Property taxes are due November 1 for the current year. Property taxes are paid in arrears, meaning that although they are assessed on January 1, the bill is not due until November 1 of the same year.
Homeowners originally purchased a new home for $225,000. During the period of ownership, the homeowners spent $27,500 in capital improvements. When the homeowners sold the home 15 years later for $359,900, they paid a brokerage fee of 5% of the sale price and paid out-of-pocket closing costs totaling $2,550. What is the homeowners’ capital gain from the sale?
A) $48,045 B) $197,500 C) $114,355 D) $86,855
Explanation
The answer is $86,855. $359,900 sale price ×.05 = $17,995 broker commission. $359,900 – $17,995 – $2,550 closing costs = $339,355 amount realized from sale. $225,000 purchase price + $27,500 capital improvements = $252,500 adjusted basis. $339,355 – $252,500 = $86,855 capital gain
If a married couple who files jointly realizes a profit from the sale of their home that exceeds $500,000, what is the result?
A)
The homeowners will not pay capital gains tax if at least one of them is older than 55.
B)
The excess gain will be taxed at the current applicable capital gains rate.
C)
The excess gain will be taxed at the homeowner’s income tax rate.
D)
Up to $125,000 of the excess profit will be taxed as a capital gain.
Explanation
The answer is the excess gain will be taxed at the current applicable capital gains rate. Gain is not taxed up to $500,000.
If a request for a property tax adjustment is denied, what is the property owner’s next step?
A)
Contact the county tax collector or a representative
B)
File a certiorari proceeding with the county court
C)
Sue the county property appraiser
D)
File a petition with the Value Adjustment Board
Explanation
The answer is file a petition with the Value Adjustment Board. If the property owner’s request for an adjustment is rejected, the owner may file an appeal (petition) with the Value Adjustment Board.
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Which property is exempt from property taxes?
A) Air Force base B) Florida Museum of Natural History C) Federal Reserve building D) Church
Explanation
The answer is church. Exempt properties include property belonging to churches and nonprofit organizations. Immune properties are city, county, state, and federal government buildings.
The Value Adjustment Board is composed of
A)
two school board members and three county commissioners.
B)
three school board members and two county commissioners.
C)
one school board member, two county commissioners, and two citizen members.
D)
the city manager, property appraiser, and three other elected officials.
Explanation
The answer is one school board member, two county commissioners, and two citizen members. The board is made up of five members.
