Ethics, Investment Properties, Income Tax, Trust Accounts, Environmental Issues Flashcards
Capital Gains
⚡️Formula⚡️
Realized Amount
(-) Adjusted Basis
___________________
Capital Gains (taxable gains)
⭐️P.O.I.T.⭐️
Tax Deductible
Points. \
Origination Fees. \
⭐️P.O.I.T⭐️
Interest. /
Taxes. /
1031 tax-deferred exchange (like-kind exchange)
Used by investors to defer payments of capital gains taxes.
Allows to sell one property and buy a new one without paying cap gains.
⚡️The intent is to defer payment until owner is in a lower tax bracket.⚡️
⭐️Real Estate Professionals are expected to fully disclose what?⭐️
1- Whom they represent in the transaction.
2- The obligations of all parties in regard to disclosure of material defects.
3- Whether they are a principal in the transaction.
4- Whether there may be any environmental, material, or other issues requiring disclosure that might impact the property.
Equity
Mkt value (-) current debt
Ad Valorem
Property Taxes
When must you pay capital gains taxes?
Short-term gain: on property held 12 months or less, taxes at ratepayer’s ordinary income tax rate.
Long-term gain: on property held more than 12 months
The gain from the sale of a primary residence is excluded from full tax how?
1- $250,000 maximum if single or if married filing separately.
2- $500,000 maximum if married filing jointly.
The taxpayer must own & occupy the residence for @ least 2 of the last 5 years before the sale.
Depreciation
Value of improvements ➗ number of years being depreciated ✖️number of years already taken.
Using trust funds for personal reasons or for other people is called ___________ and is illegal!
Conversion
Brokers must __________________ of all money deposited in and disbursed from the trust account.
Keep accurate records.
Environmental issues are considered ____________ that must be disclosed by the ⚡️seller⚡️and the ⚡️brokers⚡️
Material Facts
⭐️includes issues outside of the property boundaries ⭐️
A broker who suspects that an environmental issue may affect the property, must ___________ , even if the sellers believes it has been ______________.
Disclose it.
Cured or removed.
Concerning asbestos…
If a building is being demolished or renovated, _____________ (_________) should be done by a licensed professional before demolition.
Abatement (removal)
Encapsulation
(Sealing in place) is often a better choice than removal because there no danger of exposing the fibers.
Radon
Naturally occurring odorless, radioactive gas.
Can cause lung cancer.
Impossible to detect without testing.
Typically mitigated by adding a ventilation or exhaust system to move the gas outside.
⭐️Levels must be under 4.0 picocuries⭐️
Mold
Remediation must be done per EPA and state regulations.
Buyers must inspect.
⭐️Sellers MUST DISCLOSE ANY PAST OR PRESENT MOLD ISSUES⭐️
