Practice Flashcards
1
Q
Which type of housing does this best describe: individual ownership of the unit, while ownership of common facilities is shared.
A
Condominium
2
Q
Which type of housing does this best describe: multiple purchasers are sharing ownership?
A
Time share
3
Q
Which type of housing is usually a vacation property?
A
Time share
4
Q
Which type of housing does this best describe: Different land uses, including housing, in a self-contained development.
A
Planned Unit Development
5
Q
Which type of housing is also called mixed-use development?
A
High Rise Development
6
Q
A high rise development is also called…
A
mixed-use development
7
Q
Which type of housing includes mobile homes?
A
Manufactured housing
8
Q
Which type of housing does this best describe: Shared ownership of common facilities and proprietary lease of individual unit.
A
Cooperative
9
Q
___ allows multiple purchasers to share ownership of a single property.
A
Time share
10
Q
What are the 4 basic costs of owning a home?
A
Principal
Interest
Taxes
Insurance
11
Q
Who does the IRS require to pay tax on the boot?
A
The party who receives the boot
12
Q
When does the IRS require tax on the boot to be paid?
A
At the time of the exchange
13
Q
Although tax benefits to homeownership previously existed, those benefits have been abolished in recent years. True or false?
A
False
14
Q
A cap of $___ is excluded from capital gains tax for profit on the sale of a principal residence by married taxpayers who file jointly.
A
$500,000
15
Q
A cap of $500,000 is excluded from ___ for profit on the sale of a principal residence by married taxpayers who file jointly.
A
Capital Gains Tax
16
Q
Damage from sewer backups is covered by ___ insurance if the backup resulted directly from flooding.
A
Flood
17
Q
The two most common types of homeowners insurance policies
A
Basic form
Broad form
18
Q
To finance property with federal mortgage loans, owners in flood-prone areas are required to obtain…
A
Flood insurance
19
Q
What do most homeowners purchase to protect their real estate investment?
A
Homeowners Insurance
20
Q
What do many homeowners insurance policies include that stipulates the policyholder maintain insurance in an amount equal to 80% of the replacement cost of the home?
A
Coinsurance Clause
21
Q
What is a requirement set by the federal government to qualify for a federally regulated or federally insured mortgage loan for properties located in special flood hazard areas?
A
Flood Insurance
22
Q
Flood insurance is NOT a requirement to qualify for a mortgage in a special flood hazard area if mortgage is a federally insured mortgage, because the mortgage is already insured. True or false?
A
False
23
Q
A couple paid $56,000 for their property 20 years ago. Today, the market value is $119,000, and they owe $5,000 on their mortgage. How much is their equity?
A
$114,000
24
Q
A high-rise development that includes office spaces, stores, theaters, and apartment units is an example of a(n)…
A
Mixed-unit development
25
How much is the capital gains exclusion for a single filer?
$250,000
26
How much is the capital gains exclusion for a couple filing taxes jointly?
$500,000
27
How long must someone live in their property in order to claim the capital gains exclusion on their income tax?
2 out of the last 5 years
28
Tom, an art history professor owned and lived in a home in Dupuque, IA for the last four years. He spends a year in Italy after which he decides to sell his home in Dubuque and live in Rome. If Tom is single, how much can he claim for the capital gains exemption?
$250,000
29
Each room of a house was pre-assembled at a factory, driven to a building site on a truck, and then lowered onto its foundation by a crane. Later, workers finished the structure and connected plumbing and wiring before the owners moved in. Which type of home does this best describe?
Modular
30
Which of these is NOT a cost or expense of owning a home?
a) taxes on personal property
b) home owners insurance
c) maintenance and repairs
d) interest paid on borrowed capital
taxes on personal property
31
Which clause is found in most homeowners insurance policies?
Coinsurance Clause
32
When married homeowners who file jointly realize a gain from the sale of their home that exceeds $500,000, the gain exceeding $500,000 will be taxed at the current...
applicable capital gains rate
33
The portion of an owners' property value that exceeds the amount of their mortgage debt is called ___.
Equity
34
A community that merges housing, recreation, and commercial units into one self-contained development is called a(n)...
planned unit development
35
Is flooding generally covered by basic form home owners insurance policies?
no
36
Is flooding generally covered by broad form home owners insurance policies?
no
37
If a client asks a real estate licensee for advice about tax benefits of home ownership, the real estate licensee should...
Advise the client to seek the advice of an attorney, accountant, or tax professional
38
An unmarried homeowner has $80,000 in equity in his primary residence of three years. The owner sells the residence for $135,000. The broker's commission was 5.5% and other selling expenses amounted to $1,200. What is the owner's taxable gain on this transaction?
$0
39
A single family home to be used as principal residence would NOT be like-kind property in a 1031 exchange of a rental single family home. True or false?
True
40
Daisy is a single woman who bought a home 18 months ago and is now selling because she found a new job in another city. Mickey and Minnie are a married couple filing joint taxes has owned a 9 bedroom home for three years. Now, the couple wants to move to a small condominium unit. Donald is a single man owned his home for 17 years, sold it, and will use the proceeds from the sale to purchase a larger home. Based on these facts, which of these people is entitled to the $500,000 capital gains exclusion?
Mickey and Minnie
41
In determining whether a prospective buyer can afford a certain home purchase, lenders will consider
A) Address of the home
b) credit score
c) ethnicity of the buyer
d) all the above
Credit score
42
Theft, smoke damage, and damage from fire are covered under which type of homeowners insurance policy?
Basic form
43
Bill incurs the following expenses: $9,500 in interest on a mortgage loan on his residence, $800 in real estate taxes plus a $450 late payment penalty, and a $1,000 loan origination fee paid in the course of purchasing his home. How much may he deduct from his gross income?
$11,300
44
Bill incurs the following expenses: $9,500 in interest on a mortgage loan on his residence, $800 in real estate taxes plus a $450 late payment penalty, and a $1,000 loan origination fee paid in the course of purchasing his home. Which one of these expenses can NOT be deducted from his gross income?
The late payment penalty
45
Charlie's Chocolate Factory was an industrial property that was abandoned in 2020 after the company went out of business. In 2024, an investor purchased the property and hired developers to remodel the building into luxury condominium lots. This is an example of which type of property?
Converted-Use
46
Homeowners can deduct which of the following expenses when paying their income tax return?
a) interest paid on maintenance and repairs
b) flood insurance premiums
c) real estate taxes
d) insurance premiums
Real Estate Taxes
47
Mike is a real estate investor who purchased a hotel from Hilton. He redeveloped the building into luxury apartments. What type of housing is this?
Converted use
48
Retirement communities are often set up as...
Planned Unit Developments
49
Trump tower in chicago contains condominiums, a hotel, and commercial space. Trump tower would be considered as a(n)...
Mixed-use development
50
Receipt of cash gain or lessening of mortgage debt. Amount or value of this will be taxed. Value is added to the basis of the property for which it is given.
Boot
51
The profit made when an asset is sold
Capital Gain
52
Clause in insurance policies covering real property requiring that the policy holder maintain insurance coverage generally equal to at least 80% of the property's actual replacement cost of the dwelling (not including the price of the land)
Coinsurance clause
53
The interest or value that an owner has in property over and above any indebtedness; represents the paid off share of the property held free of any mortgage.
Equity
54
A standardized package insurance policy that covers a residential real estate owner against financial loss from fire, theft, public liability, and other common risks.
Homeowners insurance policy
55
Insurance that covers injuries or losses sustained within that home
Liability Coverage
56
property of the same nature, character or class.
Like-kind property
57
With like-kind property, quality or grade does not matter as long as the property is of the same character, nature, or class. True or false?
True
58
What does PITI stand for?
Principal, Interest, taxes, and insurance
59
___ is an acronym that is reference to expenses that compromise an owner's monthly payment
PITI
60
The construction cost at current prices of a property that is not necessarily an exact duplicate of the subject property but serves the same purpose or function as the original
Replacement Cost
61
What are 2 financial benefits of home ownership
1) Investment that can appreciate in value
2) Federal income tax deductions
62
Groups of apartment buildings with any number of units in each building.
Apartment complexes
63
Type of housing where owner owns their unit, and shares ownership of property's common facilities with other condominium owners in the building.
Condominium
64
Who owns common facilities such as elevators, hallways, swimming pools, club houses, tennis courts, and surrounding grounds in a condominium?
Ownership is shared
65
How are expenses of management & maintenance of the building paid in a condominium?
Monthly assessments charged to condominium owners
66
One benefit of owning this type of housing is security of owning property without the care and maintenance a house demands
Condominium
67
In a condominium, who is responsible for management & maintenance of building exteriors and common facilities are provided?
A governing association or outside contractors
68
Type of housing where owners buy stock in the corporation that holds title to the building, and receive proprietary leases that entitle them to occupy particular units.
cooperative
69
In a cooperative, "owners" own their unit. True or false?
False
70
Which type of housing is similar to condominium in the sense that it offers units with shared common facilities?
Cooperative
71
How much do cooperative owners pay for building maintenance expenses?
Owners pay their share
72
Type of housing that merges diverse land uses such as housing, recreational facilities, and commercial use into one self contained development.
Planned Unit Developments (PUDs)
73
PUDs stands for
Planned Unit Developments
74
Type of housing that is also called master-planned communities
Planned Unit Developments (PUDs)
75
In Planned Unit Developments, do owners have direct ownership in common areas?
No
76
Who maintains common areas in a Planned Unit Development?
A community association
77
Who pays community association maintenance fees in a Planned Unit Development?
Owners
78
Provide residential units, but also may provide amenities such as shopping, recreation, and health care facilities, and owners are generally older than 55.
Retirement Communities
79
Combine elements of office space, stores, theaters, and apartment units into a single vertical community. Usually self contained.
High Rise Developments or Mixed-Use Developments
80
MUDs stands for...
mixed-use developments
81
Commercial, industrial, and special purpose properties who's use has been converted to residential use
Converted Use Properties
82
What type of houseing might be more aesthetically and economically appealing to developers than demolishing the structure for new construction?
Converted Use Properties
83
An abandoned warehouse was transformed into luxury loft condominium units. What type of housing is this?
Converted Use Properties
84
What type of housing includes mobile homes?
Manufactured Housing
85
Type of housing where each room is pre-assembled at a factory and driven to the building site on a truck, then lowered onto foundation by a crane. After that, workers finish the structure and connect plumbing and wiring.
Modular homes
86
What type of housing is also known as prefabricated homes?
Modular homes
87
Entire developments can be built at a fraction of the time and cost as conventional construction in which type of housing?
Modular homes
88
This type of housing allows multiple purchasers to share ownership or use of a single property in intervals. Each owner is allowed to use the property for a certain period of time each year.
Time Share
89
The Smith family shares ownership rights with others to a house in Key West, Florida. The Smiths are only entitled to occupy the property during the 3rd week of December. What type of home ownership is this?
Time share
90
What else do time share owners need to pay for in addition to their purchase price?
annual maintenance fees
91
Trash removal, sewer charges, and home maintenance & repairs are included in the basic costs of owning a home. True or false?
False
92
As the total mortgage debt is reduced through monthly payments, the owner's ___ in the property increases.
equity
93
If property value increases, the sale could bring in more money than what the owner had purchased for. This creates...
Long-term gain
94
Homeowner's mortgage payments build ___.
Equity
95
As equity builds, the homeowners ___ increases.
net worth
96
___ increases when the property's value rises through area appreciation
Equity
97
Tax deductions are available to ___ but not to ___.
Available to homeowners
Not to renters
98
How long you want to live in a particular area does not need to be considered when you are thinking about buying a home as long as you can pay your mortgage. True or false?
False
99
What advantage does the government offer homeowners to encourage home ownership?
Income tax reductions
100
If mortgage was taken out AFTER December 14, 2017, homeowners may deduct interest off of debt up to $___.
$740,000
101
If mortgage was taken out PRIOR to December 14, 2017, may deduct interest off of debt up to $___.
$1 million
102
Mortage interest paid up to a certain point can not be used as...
an income tax reduction
103
Between January 1, 2018 and December 31, 2025, interest on ___ is no longer tax deductible. True or false?
A second mortgage
104
State and local real estate taxes can be used as an itemized deduction up to a limit of $___.
10,000
105
Mickey and Minnie are a married couple. How much are they entitled to in capital gains tax exclusions for profits on the sale of their principal residence?
$500,000
106
Goofy is a single man. How much is he entitled to in capital gains tax exclusions for profits on the sale of his principal residence?
$250,000
107
Capital Gains tax exemption is available as long as homeowners have owned and occupied the property for at least ___ of the past ___ years
At least 2 of the past 5 years
108
If capital gains are greater than $500,000 or $250,000, exclusion depends on...
what tax bracket the tax filer(s) falls into.
109
Capital gains taxation rate may change from year to year. True or false?
True
110
Real estate investors can defer taxation of capital gains by making...
property exchanges
111
Real estate investors can defer taxation of ___ by making property exchanges
Capital gains
112
In a property exchange, the owner will only incur tax liability on a sale if additional ___ or ___ is also received.
Capital or property
113
In a property exchange tax is ___ but not eliminated.
Deferred
114
In a property exchange tax is deferred but not ___.
eliminated
115
Properties involved in a property exchange must be...
Like-kind
116
To avoid paying tax, exchanged property must be real estate of ___ or ___ value to avoid capital gains tax.
equal or greater
117
To avoid paying tax, exchanged property must be real estate of equal or greater value to avoid ___.
Capital gains tax
118
Why shouldn't a real estate licensee make representations about tax implications to their clients?
opens the licensee up to a great deal of liability.
119
If a client asks a real estate agent for guidance on tax implications, what should the real estate agent do or say?
Advise the client to seek guidance from a tax professional or an accountant
120
What would an owner purchase to protect their property investment?
Insurance
121
Homeowners insurance is normally required by...
Lenders
122
Most homeowners insurance policies contain a...
coinsurance clause
123
Basic form and broad form are types of...
Homeowners Insurance policies
124
A standardized package insurance policy that covers a residential real estate owner against financial loss from fire, theft, public liability, and other common risks.
Homeowners Insurance
125
The most common type of homeowners insurance policy
Basic form
126
This kind of homeowners insurance policy covers fire, damage from smoke, and explosions.
Basic form
127
This kind of homeowners insurance policy covers lightning, windstorm, and hail.
Basic form
128
This kind of homeowners insurance policy covers broken glass
Basic form
129
This kind of homeowners insurance policy covers riot & civil commotion, vandalism, malicious mischief, and theft
Basic form
130
This kind of homeowners insurance policy covers damage from aircrafts
Basic form
131
This kind of homeowners insurance policy covers damage from vehicles
Basic form
132
This kind of homeowners insurance policy covers loss of property removed from the premises when it is endangered by a fire or other perils
Basic form
133
Donald is running for political office. A group of political activists organized a peaceful protest in front of his house because they were upset about the racist comments he had posted on Twitter. The protest eventually escalated to a riot where his property was vandalized. Is it likely that Donald's basic form homeowners insurance policy will offer coverage against the damages to his property?
Yes
134
Lisa lives in Wood Dale, IL, and her home is underneath a flight landing path toward O'hare airport. On a busy Sunday afternoon at LAX, Spirit Airlines had failed to properly inspect one of their aircrafts before allowing it to take off. As a result of Spirit Airlines' negligence, the aircraft encountered mechanical issues when it was descending to land at O'hare. One of the wheels of the aircraft had dislodged and crashed into the roof of Lisa's house. Thankfully, Lisa was at the Cubs game with her family when this happened, and nobody was injured from the damages. When she gets home from the game, she is shocked to see a hole in her ceiling, with aircraft debris on the floor underneath the hole. Lisa has a basic form homeowners insurance policy. Is it safe to assume that her insurance will offer coverage against the damages from the aircraft, even though nobody in her family was injured when the accident happened?
Yes
135
This type of homeowners insurance policy offers coverage against damages from falling objects.
Broad form
136
This type of homeowners insurance policy offers coverage against damages from weight of ice, snow, or sleet
Broad form
137
This type of homeowners insurance policy offers coverage against damages from collapse of all or part of the building
Broad form
138
This type of homeowners insurance policy offers coverage against damages if water heating appliances were to burst, crack, burn, or bulge
Broad form
139
This type of homeowners insurance policy offers coverage against damages from accidental discharge, leakage, or overflow of water or steam within a plumbing, heating, or air conditioning system
Broad form
140
This type of homeowners insurance policy offers coverage against damages from freezing of plumbing, heating, or air conditioning systems
Broad form
141
Tom and Jerry are a retired couple who own a house in Chicago where they live in the summer and spring months, as well as a house in Arizona where they live during the fall and winter months. In 2018, they had forgotten to allow their faucet to drip in their Chicago home prior to leaving for Arizona. Some time that winter, temperatures in Chicago had dropped as low as -30 degrees. One of the pipes in their Chicago home had frozen. Which type of homeowners insurance policy might provide coverage against the damages from this?
Broad form
142
This type of homeowners insurance policy offers coverage against damages from injury to the property as a result of electrical appliances, devices, fixtures, and wiring from short circuits or other accidentally generated currents.
Broad form
143
Special insurance policies for condominiums and apartments generally provide coverage against fire & windstorm, theft, as well as...
public liability coverage
144
Special insurance policies for condominiums and apartments usually do not cover...
losses or damages to the structure
145
Who would insure the building's structure in an apartment or condominium?
the landlord or condominium owner's association
146
Which provision to homeowners insurance requires the owner to maintain insurance coverage equal to a specific percentage of the replacement cost?
Coinsurance clause
147
The construction cost at current prices of a property that is not necessarily an exact duplicate of the subject property but serves the same purpose or function as the original
Replacement cost
148
A coinsurance clause requires policy owners to maintain coverage of the replacement cost of a dwelling, not including the cost of the ___.
Land
149
What was enacted by Congress to help owners of property in flood-prone areas by subsidizing flood insurance and by taking land-use and land-control measures to improve future management for floodplain areas?
National Flood Insurance Act of 1968
150
Who administers the flood insurance program?
The Federal Emergency Management Agency (FEMA)
151
A homeowners insurance policy covers 80% of the replacement cost of the home. The structure is valued at $100,000, not including the land. If the homeowner sustains $30,000 in fire damage to the house, what is the highest amount she can make a claim for against the loss or damages to her property?
$30,000
152
A homeowners insurance policy covers 80% of the replacement cost of the home. The structure is valued at $100,000, not including the land. If the homeowner sustains $30,000 in fire damage to the house, can she make a claim for the full cost of the repair or replacement of damaged property?
Yes
153
If a person owns property in a special flood hazard area, what type of insurance policy are they required to purchase in order to qualify for a federal mortgage?
Flood insurance
154
How are flood insurance rates determined for property in a special flood hazard area?
evaluation from a licensed surveyor
155
Home owner's insurance policies in flood-prone areas will always include coverage against flooding. True or false?
False
156
In designated areas, flood insurance is required on all types of buildings (residential, commercial, industrial, agricultural), for either the value of ___ or ___.
the property or the amount of the mortgage loan
157
FEMA defines ___ as a general and temporary condition of partial or complete inundation of two or more acres of normally dry land or two or more properties (at least one of which is the policyholder's property) from: overflow of inland or tidal waters, unusual and rapid accumulation or runoff of surface waters from any source, mudflow, or collapse or subsidence of land along the shore of a lake or similar body of water as a result of erosion or undermining caused by waves or currents of water exceeding anticipated cyclical levels that reach in a flood as defined above
Flood
158
What type of insurance policy would offer coverage in the event of a mudflow?
Flood
159
What type of insurance covers physical damage to a building or personal property caused by a flood?
Flood insurance
160
sales price minus purchase price = ___.
Gain
