Chapter 4: RE Taxes and Investments

Question 1

What are the 2 categories of Real Estate taxes?

Answer 1

1. Ad Valorem Taxes

2. Special Assessment Taxes

Question 2

Imposed by various state local governments, and based on value of property being taxes. Taxed based on its value “according to value”

Answer 2

Ad Valorem Taxes

Question 3

ForA tax or levy customarily imposed against only those specific parcels of real estate that will benefit from a proposed public improvement, such as a street or sewer.

Answer 3

Special Assessment Taxes

Question 4

Local tax assessors office in each community appraises all real property within jurisdiction

Answer 4

Assessment

Question 5

This is established for sole purpose of computing real property taxes

Answer 5

Assessed Value

Question 6

The amount of money needed by each taxing district is divided by the total assessment for all real estate located within the jurisdiction in order to arrive at that districts percentage

Answer 6

Tax Rate

Question 7

One tenth of one cent 1/1,000 of a dollar

Answer 7

Mill

Question 8

If Real Estate taxes go unpaid for a prescribed length of time, local taxing authority may seek court order to sell at public auction

Answer 8

Tax Sale

Question 9

What is the right to redeem property at any time before auction by paying back taxes, interest and penalties.

Answer 9

Equitable Right of Redemption

Question 10

This is allowed during limited period of time after a tax sale

Answer 10

Statutory Right of Redemption

Question 11

Issued to a buyer at auction if there is redemption period extending after sale

Answer 11

Certificate of Sale

Question 12

If property is not redeemed within the statutory time period allowed, the buyer may then apply for what?

Answer 12

Tax Deed

Question 13

Gross income - allowable expenses/deductions

Answer 13

Taxable Income

Question 14

Increase in worth/value of property

Answer 14

Appreciation

Question 15

An allowable expense deduction that can be taken even if property in question increases in value. Allows investors to recover the cost of investments over period of time, and allowed on ONLY income-producing property

Answer 15

Depreciation

Question 16

Cost of improvement / recovery period

Answer 16

Depreciation Formula

Question 17

Use of borrowed funds to finance investment.

Answer 17

Leverage

Question 18

Occurs when investors pays back borrowed funds and property appreciates in value over time

Answer 18

Equity Build Up

Question 19

The gain or loss of a property is determined by deducting the propertys adjusted basis from the sale price. Properties bases starts at its purchase price (including closing costs) and will be increased by capital improvements

Answer 19

Cost Basis

Question 20

Purchase Price + Capital Improvements - The Depreciation decutions

Answer 20

Adjusted Basis Formula

Question 21

Profit that results from a sale of a capital asset, such as a stock, bond, or real estate, where the sale price exceeds the purchase price . The gain is the price difference

Answer 21

Capital Gains