Chapter 14 Flashcards
What is Capital Gain?
At resale of a capital item, the amount by which the net sale proceeds exceed the adjusted cost basis (book value). Used for income tax computations. Gains are called short or long term based upon length of holding period after acquisition. Usually taxed at lower rates than ordinary income.
What is Depreciation?
The ability to deduct expenses on improvements made to income producing property.
What is Straight Line Depreciation?
A method of depreciation under which improvements are depreciated at a constant rate throughout the estimated useful life of the improvement.
What is a Section 1031 Exchange?
A section of the U.S. Internal Revenue Service Code that allows investors to defer capital gains taxes on any exchange of like-kind properties for business or investment purposes.
What is a Boot?
Cash received in a tax-deferred exchange.
Real estate agents should never provide tax advice to their clients…?
A. T (True)
B. F (False)
A. T (True)
The first property tax bill is due on…? A. November 10th B December 10th C. February 10th D. April 10th
B December 10th
This Proposition benefits citizens 55 and older…? A. Proposition 11 B. Proposition 13 C. Proposition 60 D. Proposition 137
C. Proposition 60
Proposition 90 is only available in participating counties…?
A. T (True)
B. F (False)
A. True
Owner occupied residential properties are entitled to a ………... homeowner’s tax exemption? A. 2000 B. 5000 C. 7000 D. 10000
C. 7000
The profit realized from the sale of real estate is known as a…? A. Capital gain B. Capital loss C. Credit D. Debit
A. Capital gain
The amount of decrease in value of an asset that is allowed in computing the value of the property for tax purposes is known as…? A. Appreciation B. Depreciation C. Credit D. Debit
B. Depreciation
A method of depreciation under which improvements are depreciated at a constant rate throughout the estimated useful life of the improvement is known as…? A. Straight line depreciation B. Term depreciation C. Adjustable depreciation D. Consistent depreciation
A. Straight line depreciation
A section of the U.S. Internal Revenue Service Code that allows investors to defer capital gains taxes on any exchange of like-kind properties for business or investment purposes is known as…? A. Section 12-A Exchange B. Section 11 Exchange C. Section 1031 Exchange D. Section 90 Exchange
C. Section 1031 Exchange
Cash received in a tax-deferred exchange is known as…? A. Capital gain B. Asset C. Conversion D. Boot
D. Boot
Residential property is considered to have a useful life of…? A. 27.5 years B. 29 years C. 35 years D. 39 years
A. 27.5 years
Non-residential property is considered to have a useful life of…? A. 27.5 years B. 29 years C. 35 years D. 39 years
D. 39 years
The second property tax bill is due on…? A. November 10th B. December 10th C. February 10th D. April 10th
D. April 10th
For depreciation purposes, the value of land can be determined using which of the following methods…? A. Assessed value method B. Appraisal method C. Contract method D. All of the above
D. All of the above
The value of property used to determine the amount of gain or loss realized by an owner upon sale of the property is known as the…? A. Depreciated basis B. Net basis C. Adjusted basis D. Gross basis
C. Adjusted basis
Boot is considered taxable income…?
A. T (True)
B. F (False)
A. T (True)
A personal residence is also known as a…? A. Primary residence B. Secondary residence C. Vacation residence D. Investment property
A. Primary residence
A time-share is an example of a secondary residence…?
A. T (True)
B. F (False)
A. T (True)
Single owners are exempt from paying capital gains taxes on the sale of their primary residence up to…? A. 250000 B. 500000 C. 600000 D. 1000000
A. 250000
Married couples are exempt from paying capital gains taxes on the sale of their primary residence up to…? A. 250000 B. 500000 C. 600000 D. 1000000
B. 500000
In order to qualify for the primary residence capital gains tax exemption, the owner must have lived in the house for ………. out of the previous 5 years? A. 1 B. 2 C. 3 D. 4
B. 2
An item that adds value to a property, adapts the property to new users, or prolongs the life of the property is known as a…? A. Value improvement B. Income improvement C. Capital improvement D. Routine improvement
C. Capital improvement
Landscaping is an example of a capital improvement…?
A. T (True)
B. F (False)
A. T (True)
According to Proposition 13, the maximum State real estate tax is ………. of the fair market value of a property? A. 1 (% percent) B. 3 (% percent) C. 5 (% percent) D. 10 (% percent)
A. 1 (% percent)
Proposition 13 was enacted in…? A. 1964 B. 1968 C. 1978 D. 1991
C. 1978
Real estate taxes are calculated as a ………... of a property’s full cash value…? A. Flat fee B. Deductible C. Percentage D. Division
C. Percentage
Property taxes in California are reassessed as of the…? A. 1st of every year B. End of every year C. 2nd quarter of every year D. Sale date of a property
D. Sale date of a property
Real estate taxes are considered a tax deductible for homeowners…?
A. T (True)
B. F (False)
A. T (True)
A homeowner can have their property reassessed…?
A T (True)
B. F (False)
A T (True)
Which of the following allows property to be transferred between family members without being taxed on the first million dollars of market value…? A. Proposition 11 B. Proposition 58 C. Proposition 60 D. Proposition 90
B. Proposition 58
