Chapter 11: Taxation of Real Estate

Question 1

Value placed upon property, for property tax purposes, by the tax assessor.

Answer 1

Assessed valuation

Question 2

The sale of property in installments that spreads tax on profit from the sale of property over a number of years.

Answer 2

Installment sale

Question 3

A tax charged according to the value of the property.

Answer 3

Ad valorem

Question 4

One who gives a gift.

Answer 4

Donor

Question 5

A tax against the property of deceased, based on the value of the estate.

Answer 5

Federal estate tax

Question 6

One who receives a gift.

Answer 6

Donee

Question 7

In a tax-deferred exchange, any cash or other property including the transaction to make the exchange in an even proposition.

Answer 7

Boot

Question 8

The trading of parcels of real property to obtain tax benefits that might not be available any normal sale. Generally considered tax-deferred, not tax exempt.

Answer 8

Exchange

Question 9

An annual tax that applies to real estate that is based on the assessed valuation of the property.

Answer 9

Real property tax

Question 10

One who estimates the value of property for property tax purposes.

Answer 10

County assessor

Question 11

A loss in value of improvements as an accounting procedure: used as a deduction on income taxes.

Answer 11

Depreciation for tax purposes

Question 12

The person, in a given political division within a state, who is responsible for collecting property taxes.

Answer 12

County collector

Question 13

A lien assessed against real property in a given district, by public authority, to pay costs of special public improvements.

Answer 13

Special assessment

Question 14

A tax on the sale of real property, usually based on the sales price and paid on or before the recordation of the dead.

Answer 14

Documentary transfer tax

Question 15

Federal taxes paid on the giving of real property as a gift, if over an exempt amount.

Answer 15

Federal gift tax

Question 16

Limits the amount of taxes to a maximum of 1% of the March 1, 1975 market value of the property plus the cumulative increase of 2% in market value each year thereafter.

Answer 16

Proposition 13

Question 17

Personal taxes paid annually on your taxable income.

Answer 17

Federal and state income tax

Question 18

A deduction of up to $7,000 from an owner-resident’s assessed valuation on his or her property tax bill. Must be filed between March 1 and April 15 each year to receive the full deduction.

Answer 18

Homeowner’s property tax exemption

Question 19

The length of time a couple must live in their house to qualify for a $500,000 exclusion.

Answer 19

Two of the last five years

Question 20

The amount that is exempt if a single person sells his or her house.

Answer 20

$250,000

1031 Exchange.

Question 21

The County assessor accumulates a list of all private owners of real property in his or her jurisdiction. The assessment roll is used to:

a. set the tax rate for each year.
b. establish the tax base for the county.
c. determine the taxes to be paid by individual property owners.
d. equalize the assessment throughout the county.

Answer 21

b. establish the tax base for the county.

Question 22

Senior citizens may be able to defer the payment of the property taxes on their residence. In order to find out if they qualify for the program, the senior citizen should contact the:

a. Real Estate Commissioner.
b. State Franchise Tax Board.
c. State Housing Authority.
d. County Tax Assessor.

Answer 22

b. State Franchise Tax Board.

Question 23

The difference between property taxes and special assessments is that:

a. assessment liens are always subordinate to property tax liens.
b. assessment liens can only be levied by local improvement districts.
c. foreclosure of assessment liens can only be achieved by court foreclosure.
d. special assessments are levied for the cost of specific local improvements, while property tax revenue goes into the general fund.

Answer 23

d. special assessments are levied for the cost of specific local improvements, while property tax revenue goes into the general fund.

Question 24

The Street Improvement Act of 1911 can be used by a developer for all the following, except:

a. constructing sewers.
b. improving streets.
c. constructing streets.
d. purchase of land for subdividing.

Answer 24

d. purchase of land for subdividing.

Question 25

The primary responsibility for disclosing any Mello-Roos bonds or assessments to a buyer when a home is sold lies with:

a. the seller.
b. the seller’s agent.
c. the buyer’s agent.
d. all of the above.

Answer 25

a. the seller.

Question 26

Which of the following have the least effect on property taxes and value?

a. compacted population density
b. new development
c. a recorded homestead
d. tax deferment

Answer 26

c. a recorded homestead

Question 27

A home sold for $200,000. The buyer assumed an existing loan against the property for $160,000. The documentary transfer tax for this county is $.55 per $500 of consideration. The transfer tax is:

a. $11.
b. $22.
c. $33.
d. $44.

Answer 27

d. $44.

[(sell price) - (exisiting loan) / ($500 consideration)] x ($.055)

Question 28

Under Federal Income Tax Laws, most real estate licensees are considered:

a. employees of the broker.
b. employees of the seller.
c. independent contractors.
d. any of the above.

Answer 28

c. independent contractors.

Question 29

Which of the following is true regarding the depreciation of land under federal income tax law?

a. land may be depreciated by 125% declining balance method.
b. owner may deduct the accrued depreciation of land over time.
c. land may be depreciated by the sum of the year’s digits method.
d. land cannot be depreciated under federal income tax law.

Answer 29

d. land cannot be depreciated under federal income tax law.

Question 30

The Foreign Investment in Real Property Tax Act (FIRPTA) requires a buyer to withhold 10% of the gross sale price if a seller is a foreign person. If a buyer is purchasing a home from the seller, which of the following would be exempt from this act?

a. a home valued under $300,000 and the buyer will reside in the home.
b. a home valued over $500,000 and the buyer will reside in the home.
c. a home valued at $1,000,000 and the buyer will reside in the home.
d. none of the above.

Answer 30

a. a home valued under $300,000 and the buyer will reside in the home.