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Unit 3: Concepts of Home Ownership > Practice > Flashcards

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

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2
Q

Which type of housing does this best describe: multiple purchasers are sharing ownership?

A

Time share

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3
Q

Which type of housing is usually a vacation property?

A

Time share

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4
Q

Which type of housing does this best describe: Different land uses, including housing, in a self-contained development.

A

Planned Unit Development

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5
Q

Which type of housing is also called mixed-use development?

A

High Rise Development

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6
Q

A high rise development is also called…

A

mixed-use development

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7
Q

Which type of housing includes mobile homes?

A

Manufactured housing

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8
Q

Which type of housing does this best describe: Shared ownership of common facilities and proprietary lease of individual unit.

A

Cooperative

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9
Q

___ allows multiple purchasers to share ownership of a single property.

A

Time share

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10
Q

What are the 4 basic costs of owning a home?

A

Principal
Interest
Taxes
Insurance

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11
Q

Who does the IRS require to pay tax on the boot?

A

The party who receives the boot

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12
Q

When does the IRS require tax on the boot to be paid?

A

At the time of the exchange

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13
Q

Although tax benefits to homeownership previously existed, those benefits have been abolished in recent years. True or false?

A

False

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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

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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

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16
Q

Damage from sewer backups is covered by ___ insurance if the backup resulted directly from flooding.

A

Flood

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17
Q

The two most common types of homeowners insurance policies

A

Basic form
Broad form

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18
Q

To finance property with federal mortgage loans, owners in flood-prone areas are required to obtain…

A

Flood insurance

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19
Q

What do most homeowners purchase to protect their real estate investment?

A

Homeowners Insurance

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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

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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

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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

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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

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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

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25
Q

How much is the capital gains exclusion for a single filer?

A

$250,000

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26
Q

How much is the capital gains exclusion for a couple filing taxes jointly?

A

$500,000

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27
Q

How long must someone live in their property in order to claim the capital gains exclusion on their income tax?

A

2 out of the last 5 years

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28
Q

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?

A

$250,000

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29
Q

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?

A

Modular

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30
Q

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

A

taxes on personal property

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31
Q

Which clause is found in most homeowners insurance policies?

A

Coinsurance Clause

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32
Q

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…

A

applicable capital gains rate

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33
Q

The portion of an owners’ property value that exceeds the amount of their mortgage debt is called ___.

A

Equity

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34
Q

A community that merges housing, recreation, and commercial units into one self-contained development is called a(n)…

A

planned unit development

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35
Q

Is flooding generally covered by basic form home owners insurance policies?

A

no

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36
Q

Is flooding generally covered by broad form home owners insurance policies?

A

no

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37
Q

If a client asks a real estate licensee for advice about tax benefits of home ownership, the real estate licensee should…

A

Advise the client to seek the advice of an attorney, accountant, or tax professional

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38
Q

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?

A

$0

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39
Q

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?

A

True

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40
Q

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?

A

Mickey and Minnie

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41
Q

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

A

Credit score

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42
Q

Theft, smoke damage, and damage from fire are covered under which type of homeowners insurance policy?

A

Basic form

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43
Q

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?

A

$11,300

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44
Q

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?

A

The late payment penalty

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45
Q

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?

A

Converted-Use

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46
Q

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

A

Real Estate Taxes

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47
Q

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?

A

Converted use

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48
Q

Retirement communities are often set up as…

A

Planned Unit Developments

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49
Q

Trump tower in chicago contains condominiums, a hotel, and commercial space. Trump tower would be considered as a(n)…

A

Mixed-use development

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50
Q

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.

A

Boot

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51
Q

The profit made when an asset is sold

A

Capital Gain

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52
Q

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)

A

Coinsurance clause

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53
Q

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.

A

Equity

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54
Q

A standardized package insurance policy that covers a residential real estate owner against financial loss from fire, theft, public liability, and other common risks.

A

Homeowners insurance policy

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55
Q

Insurance that covers injuries or losses sustained within that home

A

Liability Coverage

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56
Q

property of the same nature, character or class.

A

Like-kind property

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57
Q

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?

A

True

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58
Q

What does PITI stand for?

A

Principal, Interest, taxes, and insurance

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59
Q

___ is an acronym that is reference to expenses that compromise an owner’s monthly payment

A

PITI

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60
Q

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

A

Replacement Cost

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61
Q

What are 2 financial benefits of home ownership

A

1) Investment that can appreciate in value

2) Federal income tax deductions

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62
Q

Groups of apartment buildings with any number of units in each building.

A

Apartment complexes

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63
Q

Type of housing where owner owns their unit, and shares ownership of property’s common facilities with other condominium owners in the building.

A

Condominium

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64
Q

Who owns common facilities such as elevators, hallways, swimming pools, club houses, tennis courts, and surrounding grounds in a condominium?

A

Ownership is shared

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65
Q

How are expenses of management & maintenance of the building paid in a condominium?

A

Monthly assessments charged to condominium owners

66
Q

One benefit of owning this type of housing is security of owning property without the care and maintenance a house demands

A

Condominium

67
Q

In a condominium, who is responsible for management & maintenance of building exteriors and common facilities are provided?

A

A governing association or outside contractors

68
Q

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.

A

cooperative

69
Q

In a cooperative, “owners” own their unit. True or false?

A

False

70
Q

Which type of housing is similar to condominium in the sense that it offers units with shared common facilities?

A

Cooperative

71
Q

How much do cooperative owners pay for building maintenance expenses?

A

Owners pay their share

72
Q

Type of housing that merges diverse land uses such as housing, recreational facilities, and commercial use into one self contained development.

A

Planned Unit Developments (PUDs)

73
Q

PUDs stands for

A

Planned Unit Developments

74
Q

Type of housing that is also called master-planned communities

A

Planned Unit Developments (PUDs)

75
Q

In Planned Unit Developments, do owners have direct ownership in common areas?

A

No

76
Q

Who maintains common areas in a Planned Unit Development?

A

A community association

77
Q

Who pays community association maintenance fees in a Planned Unit Development?

A

Owners

78
Q

Provide residential units, but also may provide amenities such as shopping, recreation, and health care facilities, and owners are generally older than 55.

A

Retirement Communities

79
Q

Combine elements of office space, stores, theaters, and apartment units into a single vertical community. Usually self contained.

A

High Rise Developments or Mixed-Use Developments

80
Q

MUDs stands for…

A

mixed-use developments

81
Q

Commercial, industrial, and special purpose properties who’s use has been converted to residential use

A

Converted Use Properties

82
Q

What type of houseing might be more aesthetically and economically appealing to developers than demolishing the structure for new construction?

A

Converted Use Properties

83
Q

An abandoned warehouse was transformed into luxury loft condominium units. What type of housing is this?

A

Converted Use Properties

84
Q

What type of housing includes mobile homes?

A

Manufactured Housing

85
Q

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.

A

Modular homes

86
Q

What type of housing is also known as prefabricated homes?

A

Modular homes

87
Q

Entire developments can be built at a fraction of the time and cost as conventional construction in which type of housing?

A

Modular homes

88
Q

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.

A

Time Share

89
Q

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?

A

Time share

90
Q

What else do time share owners need to pay for in addition to their purchase price?

A

annual maintenance fees

91
Q

Trash removal, sewer charges, and home maintenance & repairs are included in the basic costs of owning a home. True or false?

A

False

92
Q

As the total mortgage debt is reduced through monthly payments, the owner’s ___ in the property increases.

A

equity

93
Q

If property value increases, the sale could bring in more money than what the owner had purchased for. This creates…

A

Long-term gain

94
Q

Homeowner’s mortgage payments build ___.

A

Equity

95
Q

As equity builds, the homeowners ___ increases.

A

net worth

96
Q

___ increases when the property’s value rises through area appreciation

A

Equity

97
Q

Tax deductions are available to ___ but not to ___.

A

Available to homeowners
Not to renters

98
Q

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?

A

False

99
Q

What advantage does the government offer homeowners to encourage home ownership?

A

Income tax reductions

100
Q

If mortgage was taken out AFTER December 14, 2017, homeowners may deduct interest off of debt up to $___.

A

$740,000

101
Q

If mortgage was taken out PRIOR to December 14, 2017, may deduct interest off of debt up to $___.

A

$1 million

102
Q

Mortage interest paid up to a certain point can not be used as…

A

an income tax reduction

103
Q

Between January 1, 2018 and December 31, 2025, interest on ___ is no longer tax deductible. True or false?

A

A second mortgage

104
Q

State and local real estate taxes can be used as an itemized deduction up to a limit of $___.

A

10,000

105
Q

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?

A

$500,000

106
Q

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?

A

$250,000

107
Q

Capital Gains tax exemption is available as long as homeowners have owned and occupied the property for at least ___ of the past ___ years

A

At least 2 of the past 5 years

108
Q

If capital gains are greater than $500,000 or $250,000, exclusion depends on…

A

what tax bracket the tax filer(s) falls into.

109
Q

Capital gains taxation rate may change from year to year. True or false?

A

True

110
Q

Real estate investors can defer taxation of capital gains by making…

A

property exchanges

111
Q

Real estate investors can defer taxation of ___ by making property exchanges

A

Capital gains

112
Q

In a property exchange, the owner will only incur tax liability on a sale if additional ___ or ___ is also received.

A

Capital or property

113
Q

In a property exchange tax is ___ but not eliminated.

A

Deferred

114
Q

In a property exchange tax is deferred but not ___.

A

eliminated

115
Q

Properties involved in a property exchange must be…

A

Like-kind

116
Q

To avoid paying tax, exchanged property must be real estate of ___ or ___ value to avoid capital gains tax.

A

equal or greater

117
Q

To avoid paying tax, exchanged property must be real estate of equal or greater value to avoid ___.

A

Capital gains tax

118
Q

Why shouldn’t a real estate licensee make representations about tax implications to their clients?

A

opens the licensee up to a great deal of liability.

119
Q

If a client asks a real estate agent for guidance on tax implications, what should the real estate agent do or say?

A

Advise the client to seek guidance from a tax professional or an accountant

120
Q

What would an owner purchase to protect their property investment?

A

Insurance

121
Q

Homeowners insurance is normally required by…

A

Lenders

122
Q

Most homeowners insurance policies contain a…

A

coinsurance clause

123
Q

Basic form and broad form are types of…

A

Homeowners Insurance policies

124
Q

A standardized package insurance policy that covers a residential real estate owner against financial loss from fire, theft, public liability, and other common risks.

A

Homeowners Insurance

125
Q

The most common type of homeowners insurance policy

A

Basic form

126
Q

This kind of homeowners insurance policy covers fire, damage from smoke, and explosions.

A

Basic form

127
Q

This kind of homeowners insurance policy covers lightning, windstorm, and hail.

A

Basic form

128
Q

This kind of homeowners insurance policy covers broken glass

A

Basic form

129
Q

This kind of homeowners insurance policy covers riot & civil commotion, vandalism, malicious mischief, and theft

A

Basic form

130
Q

This kind of homeowners insurance policy covers damage from aircrafts

A

Basic form

131
Q

This kind of homeowners insurance policy covers damage from vehicles

A

Basic form

132
Q

This kind of homeowners insurance policy covers loss of property removed from the premises when it is endangered by a fire or other perils

A

Basic form

133
Q

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?

A

Yes

134
Q

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?

A

Yes

135
Q

This type of homeowners insurance policy offers coverage against damages from falling objects.

A

Broad form

136
Q

This type of homeowners insurance policy offers coverage against damages from weight of ice, snow, or sleet

A

Broad form

137
Q

This type of homeowners insurance policy offers coverage against damages from collapse of all or part of the building

A

Broad form

138
Q

This type of homeowners insurance policy offers coverage against damages if water heating appliances were to burst, crack, burn, or bulge

A

Broad form

139
Q

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

A

Broad form

140
Q

This type of homeowners insurance policy offers coverage against damages from freezing of plumbing, heating, or air conditioning systems

A

Broad form

141
Q

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?

A

Broad form

142
Q

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.

A

Broad form

143
Q

Special insurance policies for condominiums and apartments generally provide coverage against fire & windstorm, theft, as well as…

A

public liability coverage

144
Q

Special insurance policies for condominiums and apartments usually do not cover…

A

losses or damages to the structure

145
Q

Who would insure the building’s structure in an apartment or condominium?

A

the landlord or condominium owner’s association

146
Q

Which provision to homeowners insurance requires the owner to maintain insurance coverage equal to a specific percentage of the replacement cost?

A

Coinsurance clause

147
Q

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

A

Replacement cost

148
Q

A coinsurance clause requires policy owners to maintain coverage of the replacement cost of a dwelling, not including the cost of the ___.

A

Land

149
Q

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?

A

National Flood Insurance Act of 1968

150
Q

Who administers the flood insurance program?

A

The Federal Emergency Management Agency (FEMA)

151
Q

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?

A

$30,000

152
Q

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?

A

Yes

153
Q

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?

A

Flood insurance

154
Q

How are flood insurance rates determined for property in a special flood hazard area?

A

evaluation from a licensed surveyor

155
Q

Home owner’s insurance policies in flood-prone areas will always include coverage against flooding. True or false?

A

False

156
Q

In designated areas, flood insurance is required on all types of buildings (residential, commercial, industrial, agricultural), for either the value of ___ or ___.

A

the property or the amount of the mortgage loan

157
Q

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

A

Flood

158
Q

What type of insurance policy would offer coverage in the event of a mudflow?

A

Flood

159
Q

What type of insurance covers physical damage to a building or personal property caused by a flood?

A

Flood insurance

160
Q

sales price minus purchase price = ___.

A

Gain

Unit 3: Concepts of Home Ownership (1 decks)

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