Module 9

Question 1

What is the primary source of local government revenue?

Answer 1

Property taxes

Question 2

What do property taxes fund?

Answer 2

Schools, roads, and hospitals

Question 3

How are property taxes calculated?

Answer 3

As a flat percentage tax based on assessed property value

Question 4

Who determines the assessed value of a property?

Answer 4

The County Assessor

Question 5

What is an abatement?

Answer 5

A reduction in the assessed value of a property (and its taxes) after renovation or new construction

Question 6

What abatement does the city of Cincinnati offer?

Answer 6

An automatic 10-year property tax abatement after a renovation or new construction

Question 7

What is the time period for longer abatements?

Answer 7

15 years

Question 8

What needs to be done to qualify for longer abatements?

Answer 8

The property needs to meet Leadership in Energy and Environmental Design and Visitability Standards

Question 9

When an investor gets income from Trade or Business when they do not actively participate they are getting _

Answer 9

Passive income

Question 10

When do passive investors use their investments as a tax shelter?

Answer 10

To offset active income from elsewhere

Question 11

What type of investor earns income from stocks and bonds of real estate capital assets?

Answer 11

A portfolio investor

Question 12

What is a type of real estate investment included in a portfolio?

Answer 12

A REIT

Question 13

What types of leases are included in an investor’s portfolio?

Answer 13

Long-term and triple-net

Question 14

How are the tax rates determined for portfolio investors?

Answer 14

Based on the types of income

Question 15

What are the things that a real estate investor can be taxed on?

Answer 15

Sale of the property (Disposition), property taxes, and ordinary income

Question 16

What are types of tax deductions in real estate?

Answer 16

Mortgage interest, discount points paid on the loan, depreciation allowance

Question 17

With mortgage interest deductions you can deduct _ but cannot deduct _

Answer 17

Interest on loans, principal paid

Question 18

What are the types of origination fees?

Answer 18

Origination points and discount points

Question 19

What are origination points?

Answer 19

Fees paid to compensate the lender that are not deductible

Question 20

What is an example of origination points?

Answer 20

Commissions

Question 21

What are discount points?

Answer 21

Pre-paid interest that you can deduct over the loan term

Question 22

What is the price appreciation taxed at during a disposition tax?

Answer 22

10-20%

Question 23

What can cause delays to disposition taxes?

Answer 23

Capital gains exclusive, 1031 exchange

Question 24

What is a major requirement to get the capital gains exclusion for residential properties?

Answer 24

Must have lived in the property for 2 of the previous 5 years

Question 25

What is the basic idea behind a 1031 exchange?

Answer 25

To temporarily avoid capital gains taxes by reinvesting previous capital gains

Question 26

What does an opportunity zone do for an investor?

Answer 26

Permits investors to have a portion of previous capital gains taxes reduced for investing in an opportunity zone

Question 27

What does an opportunity zone investment do?

Answer 27

Free itself from capital gains

Question 28

Who designates the opportunity zones?

Answer 28

The states

Question 29

What is affordable housing defined as?

Answer 29

Paying less than 30% of your net income in rent

Question 30

What does the Low Income Housing Tax Credit do?

Answer 30

Subsidize the acquisition, construction, and rehabilitation of affordable rental housing