Questions - Chapter 3

Question 1

The tax levy against real property to provide the funds to pay all or part of the cost of an improvement to the property is which of the following?

A. mechanic’s lien
B. special assessment
C. general lien
D. judgment lien

Answer 1

3-1 B

Question 2

Real property taxation in North Carolina:

A. requires listing the property by December 30.
B. makes September 1 the due date of the tax.
C. requires penalties for paying after September 1.
D. none of the above.

Answer 2

3-2 B

Question 3

How often may the North Carolina property tax rate be changed?

A. every eight years
B. every four years
C. every two years
D. each year

Answer 3

3-3 D

Question 4

The Jones’s home has an assessed value of $100,000 in a locality where the tax rate is $1.45 per $100. What is their monthly payment for tax escrow?

A. $83
B. $100
C. $121
D. $1,450

Answer 4

3-4 C

Question 5

The tax rate is calculated on every $100 of the:

A. sales price.
B. appraised value.
C. listing price.
D. assessed value.

Answer 5

3-5 D

Question 6

According to the Machinery Act in North Carolina, all real property must be reassessed for tax purposes at least:

A. every year.
B. every two years.
C. every four years.
D. every eight years.

Answer 6

3-6 D

Question 7

Kim’s house is located within the city limits and has a market value of $240,000. The local tax office is assessing her property at 75% and there are tax rates per $100 of $0.95 for the city and $0.35 for the county. What are her annual taxes for this property?

A. $1,710.00
B. $2,280.00
C. $2,340.00
D. $3,120.00

Answer 7

3-7 C

Question 8

Carol’s property has an annual tax bill of $1,495.00 and an assessed value $130,000. What is her tax rate per $100? (rounded)

A. $11.50
B. $1.15
C. $0.87
D. $0.01

Answer 8

3-8 B

Question 9

A municipality has total assessed value of property located within its environs of $18,057,000. They have recently adopted an annual budget of $162,513. At what rate per $100 must they tax the local properties in order to meet this budget?

A. $0.90
B. $1.14
C. $9.00
D. $11.43

Answer 9

3-9 A

Question 10

George’s property recently sold for $235,000 and has an assessed value of $215,000. If the local tax rate is $1.40 per $100 how much would the annual taxes for this property be?

A. $3,290
B. $3,150
C. $3,010
D. $250.83

Answer 10

3-10 C

Question 11

A parcel of land is being taxed at a rate of 25 mills. Assuming that it has a market value of $175,000 and is being assessed at 70%, what would the annual tax liability be?

A. $4,900.00
B. $4,375.00
C. $3,062.50
D. $1,225.00

Answer 11

3-11 C

Question 12

A parcel of property (not a corner lot) that measures 95 feet wide by 175 feet deep is being assessed $8.50 per front foot for water and sewer lines that are being installed. How much will the assessment be for this particular property?

A. $2,295.00
B. $1,615.00
C. $1,487.50
D. $807.50

Answer 12

3-12 D

Question 13

The current market value of a property is $135,000. For tax purposes, it is assessed at 60% of market value. The tax rate is $2.45 per $100 of assessed value. What is the annual tax liability?

A. $1,190.40
B. $1,323.75
C. $1,984.50
D. $3,307.25

Answer 13

T3-1 C

Taxes are based on assessed value. $135,000 (Market Value) x 60% = $81,000 (Assessed Value). $81,000 x .0245 = $1,984.50.

Question 14

Which of the following liens generally holds first priority?

A. mortgage lien
B. purchase money lien
C. ad valorem real estate tax lien
D. federal income tax lien

Answer 14

T3-2 C

Real property taxes are ad valorem taxes which means that they are levied according to value. Real estate tax liens are in first position and get top priority regardless of when the taxes were incurred.

Question 15

What will be the amount of tax payable when the property’s original assessed value is $185,000 then a 10% horizontal adjustment is made to all assessed values and the tax rate is 40 mills in a community?

A. $4,625
B. $5,087
C. $7,400
D. $8,140

Answer 15

T3-3 D

Mills are a tax calculation that is the same as “per $1,000 of value.” A horizontal adjustment means that all assessed values in a particular area have been adjusted similarly. $185,000 + 10% increase makes the assessed value $203,500. $203,500 x .04 (40 Mills) = $8,140.

Question 16

Charges levied on a property owner and limited to those living in a particular neighborhood to pay for the installation of sewer and water lines are:

A. ad valorem taxes
B. general property taxes
C. special excise taxes
D. special assessments

Answer 16

T3-4 D

Special assessments are liens levied against particular properties. They can be levied for items such as sewer and water liens, sidewalks and street lights. Special assessments are typically not levied on an ad valorem basis but on a front foot basis.

Question 17

The ad valorem property tax rates may be adjusted every:

A. year
B. two years
C. four years
D. eight years

Answer 17

T3-5 A

Tax rates can adjust annually. The NC Machinery Act requires a reappraisal of the property every eight years (an octennial appraisal) and horizontal “across the board” adjustments can be made every four years.

Question 18

Jack bought a home for $125,000 with an ad valorem tax assessed value of $130,000. The following year, a horizontal adjustment of a 15% increase in assessed value occurred. If the new tax rate is $1.678 per $100 of assessed value, what are the annual taxes?

A. $2,097.60
B. $2,508.61
C. $2,181.40
D. $2,412.13

Answer 18

T3-6 B

Taxes are based on assessed value and horizontal adjustments are across the board adjustments for homeowners. $130,000 + 15% ($19,500) = $149,500 x .01678 ($1.678 per $100) = $2,508.61.

Question 19

What is the monthly tax liability on a property assessed at $133,000 if the published tax rate is $1.50 per $100 of assessed value? The sales price of the property was $150,500. The vacancy rate in the area is 6%. The market capitalization rate is 8%.

A. $166.25
B. $188.13
C. $2,257.50
D. $1995.00

Answer 19

T3-7 A

Taxes are based on assessed value. $133,000 x .015 ($1.50 per $100) = $1,995. The problem asks for the monthly tax liability. $1995 ÷12 = $166.25.

Question 20

What is the assessed value of a house if the tax rate is $1.30 per $100 of value and the owner’s annual taxes are $1,599?

A. $12,300
B. $32,000
C. $123,000
D. $132,000

Answer 20

T3-8 C

The taxes are $1,599÷a rate of .013 ($1.30 per $100) = $123,000.

Question 21

A home with a market value of $190,000 is located in a city where the assessed value is 80% of market value. The county tax rate last year was 0.75 per $100 and the city tax rate last year was 0.85 per $100. The tax rate increased 10% this year. What is the new property tax on this house?

A. $2,432
B. $2,675.20
C. $2,150
D. $3,344

Answer 21

T3-9 B

The home has an assessed value of $152,000 ($190,000 x 80%). The previous tax rate was $1.60 per $100. (0.75 + 0.85). The new tax rate is $1.76 per $100. (1.60 +0 .16). A value of $152,000 x .0176 (1.76 per $100) = $2,675.20.

Question 22

When the real estate property taxes have been paid by the owner and the property is sold before the end of the year, what is the appropriate entry for the accounting of the taxes on the HUD-1 settlement statement?

A. debit the buyer and credit the seller
B. credit the buyer and debit the seller
C. credit the buyer and the seller
D. debit the buyer and the seller

Answer 22

T3-10 A

If the owner has already paid the taxes for the year at the time of closing then they will be entitled to a credit for the amount they overpaid. At closing the new buyer would be debited for the balance of the year and those funds would be credited to the seller.