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Real Estate > Chapter 17. > Flashcards

Chapter 17. Flashcards

1
Q

Adjusted Basis

A

The original cost of a property minus depreciation ( გაუფასურება) and sales of portions thereof plus allowable additions such as capital improvements and certain carrying costs and assessments. A bookkeeping rather than appraisal term.

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2
Q

Appreciation

A

Monetary ( ფულადი) gain resulting from the increase in the market value of an investment, excluding additions of capital. For example, a house which is sold five years after it was purchased for 50% more than the purchase price.

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3
Q

Basis

A

A major accounting method that recognizes revenues and expenses at the time physical cash is actually received or paid out.

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4
Q

Boot

A

Cash received in a tax-deferred ( გადავადება) exchange.

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5
Q

Capital Gain -

A

A profit that results from the sale of a property where the amount received from the sale exceed the purchase price.

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6
Q

Capital Loss

A

The difference between a lower selling price and a higher purchase price, resulting in a financial loss to the seller

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7
Q

Cash Flow

A

The net result when income from an investment property is subtracted from the expenses. The result is used to determine the rate of return on an investor’s money.

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8
Q

Passive Activity Income

A

Earnings an individual derives from a rental property in which he or she is not actively involved.

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9
Q

Active Income

A

Income for which services have been performed.

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10
Q

Tax Depreciation

A

An income deduction that allows a taxpayer to recover the cost or other basis of certain property. It is an annual allowance for the wear and tear, deterioration, or obsolescence of the property.

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11
Q

Recaptured Depreciation

A

When real property is sold at a gain and accelerated depreciation has been claimed, the owner may be required to pay a tax at ordinary (non-accelerated) rates to the extent of the excess accelerate depreciation.

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12
Q

Straight-line Depreciation

A

A method of calculating the depreciation of an asset which assumes the asset will lose an equal amount of value each year.

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13
Q

Tax Shelter

A

Any method of reducing taxable income resulting in a reduction of the payments to tax collecting entities, including state and federal governments.

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14
Q

Tax-Deferred Exchange

A

Under Section 1031 of the US Internal Revenue Code, the exchange of certain types of property may defer the recognition of capital gains or losses due upon sale, and hence defer any capital gains taxes otherwise due.

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15
Q

Under the Taxpayer Relief Act of 1997, a single filer can qualify up to how much in tax exemptions…?

A

$250,000 (Dollars)

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16
Q

According to the IRS, which of the following property types is NOT considered a permitted deduction on one’s tax return…?

A

Income producing properties

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17
Q

This Act lowered the top tax rate from 50% to 28%…?

A

Tax Reform Act of 1986

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18
Q

This Act raised the bottom tax rate from 11% to 15%…?

A

Tax Reform Act of 1986

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19
Q

This program was established to promote private sector involvement in the retention and production of rental houses for low income households…?

A

LIHC

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20
Q

This type of depreciation is relevant to real estate…?

A

Tax depreciation

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21
Q

This type of depreciation is described by the physical deterioration of a property…?

A

Economic depreciation

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22
Q

The taxable income of a property is calculated by subtracting the depreciation from this…?

A

Net Income

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23
Q

Which of the following assets are NOT depreciable…?

A

Land

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24
Q

Which of the following is NOT considered a depreciable asset…?

A

Personal use assets

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25
Q

The depreciable basis for a single family residence is calculated using the following formula…?

A

Value of house - land value = Depreciable basis

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26
Q

Which of the following is considered a depreciable asset…?

A

Buildings

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27
Q

Which of the following is considered a depreciable asset…?

A

Equipment

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28
Q

Using the straight-line depreciation method, income producing, non-residential properties depreciate over how many years…?

A

39

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29
Q

Real estate investors will most likely benefit most from this type of depreciation…?

A

Component Depreciation

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30
Q

Operations income does NOT include which of the following…?

A

Capital gains

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31
Q

This type of income is associated with the sale of a property…?

A

Capital gains

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32
Q

The formula for determining realized gains is equal to…?

A

Net Sales Price - Adjusted Basis

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33
Q

When does depreciation NOT help the owner of a property…?

A

At the sale of the property

34
Q

In order to qualify for a 1031 exchange, a newly purchased property must be located where…?

A

Anywhere in the United States

35
Q

When executing a 1031 Exchange, how many days does an owner have to identify a new property…?

A

45 days

36
Q

A method of calculating the depreciation of an asset which assumes the asset will lose an equal amount of value each year, is known as…?

A

Straight-line Depreciation

37
Q

This type of depreciation is described by the physical deterioration of a property…?

A

Economic depreciation

38
Q

A profit that results from the sale of a property where the amount realized from the sale exceeds the purchase price is known as…?

A

Capital Gain

39
Q

Mark owns a single family residence. Using the straight-line depreciation method, what is the theoretical economic life of Mark’s property…?

A

27.5 years
Remember, residential properties depreciate over 27.5 years, while commercial properties depreciate over 39 years.

40
Q

Which of the following is NOT considered operations income…?

A

Net proceeds from sale of property

41
Q

Short-term capital gains applies to assets owned for this time period…?

A

Less than 1 year

42
Q

When executing a 1031 exchange, the tax code requires an owner to purchase which of the following…?

A

Like-kind properties

43
Q

When executing a 1031 Exchange, how many days does an owner have to acquire the new property…?

A

180 days

44
Q

According to the IRS, which of the following property types are considered a permitted deduction…?

A

Personal residences

45
Q

Which of the following is NOT a requirement for homeowners when deducting mortgage interest on their tax returns…?

A

Must have a 30-year amortization loan

46
Q

If the sale price of a property is $1,500,000, what is the taxable gain, assuming an adjusted basis of $600,000…?

A

$900,000 (Dollars)

47
Q

This type of income is realized by the owner during the year-to-year operations of the property…?

A

Operation income

48
Q

Short-term capital gains is taxed at what tax rate…

A

Ordinary income tax rates

49
Q

Under the Taxpayer Relief Act of 1997, joint filers can qualify up to how much in tax exemptions…?

A

$500,000 (Dollars

50
Q

If the sale price of a property is $1,500,000, what is the taxable gain, assuming an adjusted basis of $600,000…?

A

$900,000 (Dollars)

51
Q

Which of the following is NOT considered operations income…?

A

Net proceeds from sale of property

52
Q

This section of the Internal Revenue Code (IRC) allows for an exclusion on capital gains tax at the sale of a primary residence…?

A

121

53
Q

When does depreciation NOT help the owner of a property…?

A

At the sale of the property

54
Q

Under the Taxpayer Relief Act of 1997, buyers were allowed to use money from these funds toward a down payment without penalties…?

A

IRA Funds

55
Q

Under Section 1031 of the US Internal Revenue Code, the exchange of certain types of property may defer the recognition of capital gains or losses due upon sale, and hence defer any capital gains taxes otherwise due is known as…?

A

Tax-Deferred Exchange

56
Q

Property taxes on these types of properties can only be deducted if one’s taxes are itemized…?

A

Non-investment properties

57
Q

According to the IRS, which of the following property types are considered a permitted deduction…?

A

Personal residences

58
Q

According to the IRS, which of the following property types is NOT considered a permitted deduction on one’s tax return…?

A

Income producing properties

59
Q

This type of depreciation is described by the physical deterioration of a property…

A

Economic depreciation

60
Q

David owns a commercial property. In determining the amount of taxes owed, David’s accountant subtracts depreciation from the net income to arrive at the taxable income of the property. The tax rate is then multiplied to this number to determine the amount of taxes owed. This is referred to as what…?

A

Tax deduction

61
Q

How much of the purchase price of a condominium is eligible for depreciation…?

A

100 (Percent %)

62
Q

Abby owns a 2 family investment property. Using the straight-line depreciation method, over how many years will Abby’s property depreciate…?

A

27.5 years

63
Q

The difference between a lower selling price and a higher purchase price, resulting in a financial loss to the seller is known as…?

A

Capital Loss

64
Q

Real estate investors will most likely benefit most from this type of depreciation…?

A

Component Depreciation

65
Q

This Act lowered the top tax rate from 50% to 28%…?

A

Tax Reform Act of 1986

66
Q

This program provided a dollar-for-dollar reduction in federal taxes for developers who built rental housing that serves low income households….?

A

LIHC

67
Q

Cash received in a tax-deferred exchange is known as…?

A

Boot

68
Q

According to the IRS, which of the following property types is NOT considered a permitted deduction on one’s tax return…?

A

Income producing properties

69
Q

David owns a commercial property. In determining the amount of taxes owed, David’s accountant subtracts depreciation from the net income to arrive at the taxable income of the property. The tax rate is then multiplied to this number to determine the amount of taxes owed. This is referred to as what…?

A

Tax deduction

70
Q

Which of the following is NOT considered operations income…?

A

Net proceeds from sale of property

71
Q

The original cost of a property minus depreciation and sales of portions thereof, plus allowable additions such as capital improvements and certain carrying costs and assessments, is referred to as…?

A

Adjusted Basis

72
Q

The Taxpayer Relief Act of 1997 allowed homeowners to realize a $250,000 - $500,000 tax exemption at the sale of their property. However, the homeowner must have lived in the residence for how many years, within the past 5 years…?

A

2

73
Q

Real estate investors will most likely benefit most from this type of depreciation…?

A

Component Depreciation

74
Q

This type of income is realized by the owner during the year-to-year operations of the property…?

A

Operation income

75
Q

Short-term capital gains applies to assets owned for this time period…?

A

Less than 1 year

76
Q

Any method of reducing taxable income resulting in a reduction of the payments to tax collecting entities, including state and federal governments, is known as…?

A

Tax Shelter

77
Q

According to the IRS, which of the following property types is NOT considered a permitted deduction on one’s tax return…?

A

Income producing properties

78
Q

Real estate investors will most likely benefit most from this type of depreciation…?

A

Component Depreciation

79
Q

What type of properties benefit from a 1031 exchange…?

A

Investment properties

80
Q

Peter is in the process of selling his multi-family building. In order to take advantage of a 1031 exchange, Peter must purchase which of the following properties…?

A

Any of the answer choices provided are correct
Shopping Center
Office Building
Multi-family Building

81
Q

When executing a 1031 Exchange, how many days does an owner have to acquire the new property…?

A

180

Real Estate (23 decks)

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