Real Estate Taxation

Question 1

Which of the following is considered an ad valorem tax?

(a) real property tax.
(b) unit tax.
(c) use tax.
(d) death tax.

Answer 1

(a) real property tax.

Real estate taxes are assessed according to the value of the property taxed (ad valorem).

Question 2

If a property owner believes that the assessed value on his or her property has been set too high, the owner could file a request to seek a reduction from the

(a) County Board of Supervisors.
(b) Assessment Appeals Board.
(c) Tax Collector.
(d) State Board of Equalization.

Answer 2

(b)Assessment Appeals Board.

Each county has an Assessment Appeals Board to which an individual can question their property’s value set by the assessor.

Question 3

An owner occupied residence qualifies for a homeowner’s exemption of

(a) $1,000.
(b) $4,000.
(c) $7,000.
(d) none of these.

Answer 3

(c)$7,000.

An owner-occupied residence, including a condominium or duplex unit, qualifies for a homeowner’s exemption of the first $7,000 of full cash value.

Question 4

The second property tax installment is due and delinquent on

(a) February 1st; April 10th.
(b) November 1st; December 10th.
(c) December 31st; June 30th.
(d) March 1st; July 1st.

Answer 4

(a)February 1st; April 10th.

Question 5

Real property taxes become a lien on

(a) November 1st.
(b) February 1st.
(c) January 1st.
(d) July 1st.

Answer 5

(c)January 1st.

Question 6

Tax delinquent residential real property not redeemed by the owner during the five year statutory redemption period is deeded to the

(a) city.
(b) county.
(c) state.
(d) school district.

Answer 6

(c)state.

If the property is not redeemed by the owner during this statutory redemption period, the property is deeded to the state.

Question 7

Recognizing that many older people on fixed incomes have trouble paying property taxes, the Property Tax Postponement Law was passed to allow

(a) senior citizens to postpone payment of property taxes.
(b) blind or disabled people to postpone payment of property taxes.
(c) both (a) and (b) are correct.
(d) certain individual

Answer 7

(c)both (a) and (b) are correct.

The state recognizes that many older people on fixed incomes are property owners but have little funds to set aside for taxes. The Property Tax Postponement Law allows a senior citizen (person aged 62 or older) to postpone payment of taxes on his or her personal residence. Postponement also may be made by persons who are blind or disabled, as defined in the law. If the applicant is married, only one spouse need qualify. Houseboats and floating homes on which the property taxes are delinquent at the time of application are not eligible for postponement.

Question 8

Which of the following can a property owner expect after sewer lines are installed in front of his/her property?

(a) supplemental assessment
(b) general assessment
(c) special assessment
(d) All of the above

Answer 8

(c)special assessment

A special assessment is a tax imposed against only those specific parcels of realty that will benefit from a proposed public improvement, as opposed to a general tax on the entire community.

Question 9

In computing transfer tax, the consideration paid for the property excludes

(a) the down payment.
(b) the deposit.
(c) any preexisting liens or encumbrances.
(d) any property taxes due.

Answer 9

(c)any preexisting liens or encumbrances.

In computing transfer tax, the consideration paid for the property excludes any preexisting liens or encumbrances that were not removed by the sale (such as an assumed loan).

Question 10

A manufactured (mobile) home can be either personal property or real property. As personal property, a manufactured home is subject to

(a) local property taxation.
(b) vehicle license fee status.
(c) special tax assessment status.
(d) supplemental tax status.

Answer 10

(b)vehicle license fee status.

Manufactured (mobile) homes can be either personal property or real property. As personal property, a manufactured home is subject to vehicle license fee status. Vehicle license fee status means that title to the manufactured home is registered with the Department of Housing and Community Development (HCD). If treated as real property, a manufactured home is subject to local real property taxation.

Question 11

The California sales tax is a(n)

(a) ad valorem tax.
(b) tax paid on real estate.
(c) tax paid on tangible personal property.
(d) tax paid on all personal property.

Answer 11

(c)tax paid on tangible personal property.

The California State Sales Tax is imposed upon retailers for the privilege of selling tangible personal property at retail.

Question 12

The maximum nontaxable amount that can be given as a gift to one donee, in one year, is currently

(a) $15,000.
(b) $10,000.
(c) $5,000.
(d) $1,000.

Answer 12

(a)$15,000.

A gift is a voluntary transfer by an individual of any type of property for less than full consideration. The giver is the donor; the recipient of the gift is the donee. No gift tax return need be made on a gift to one donee, in one year, of a present interest valued, as of 2019, at $15,000 or less. (A married couple could give $15,000 each, for a total of $30,000 to one donee in one year.) For every year after that, the maximum gift allowed before a gift tax return must be made will be $14,000 per donee plus an adjustment for inflation, although the exclusion will remain at $14,000 for 2014. If the gift is a future interest, a return always must be made.

Question 13

Which of the following is true regarding current federal estate tax law?

(a) The Tax Cuts and Jobs Act of 2017 (TCJA) established a federal estate tax exemption of $11.18 million per person, indexed for inflation.
(b) ) The estate is taxed at a 40% rate on any estate value over that amount.
(c) The exemption was $11.18 million for 2018 and $11.4 million for 2019.
(d) All of the above

Answer 13

(d)All of the above

Question 14

Tax consequences with respect to real estate should be known

(a) prior to acquisition.
(b) at time of sale.
(c) at close of escrow.
(d) three months after taking possession.

Answer 14

(a)prior to acquisition.

Question 15

A way to spread the cost of acquiring property used in a trade or business over its useful life that is a deduction from adjusted gross income describes

(a) reconciliation.
(b) recuperation.
(c) depreciation.
(d) deferred maintenance.

Answer 15

(c)depreciation.

Depreciation is an expense deduction taken for an investment in depreciable property to allow for the recovery of the cost of the investment. The annual amount of the depreciation deduction results from an arbitrary apportionment of the investment in the building systematically spread over its useful life.

Question 16

Which of the following is a tax consideration for the homeowner?

(a) mortgage interest deductions
(b) tax credits
(c) capital gains exclusion
(d) All of the above

Answer 16

(d)All of the above

Question 17

An investor can take advantage of all of the following EXCEPT

(a) depreciation.
(b) deductions for expenses of operation.
(c) homeowner’s exemption from federal income tax.
(d) deduction of rental property losses.

Answer 17

(c)homeowner’s exemption from federal income tax.

An investor cannot take advantage of the homeowner’s exemption from federal income taxation but receives other benefits of property ownership.

Question 18

If Johnson’s intent is to accomplish a “tax free” exchange of his apartment building, he should exchange for

(a) another apartment building.
(b) a personal residence.
(c) a second home.
(d) an owner-occupied, single-family residence.

Answer 18

(a)another apartment building.

To be a tax-deferred exchange, as defined in Section 1031 of the Internal Revenue Code, the properties exchanged must be of like kind in nature or character. Most real property can be exchanged for other real property, such as an office building for vacant land. Property held for personal use cannot be exchanged for investment property; for example, a personal residence cannot be exchanged for a house that will be rented.

Question 19

An installment sale represents a tax advantage because

(a) it reduces tax rates.
(b) it eliminates taxes all together.
(c) it is a tax exemption.
(d) it defers payment of capital gains.

Answer 19

(d)it defers payment of capital gains.

An installment sale allows the taxpayer to postpone the receipt and reporting of income to future years when his or her other income may be lower. Thus, a taxpayer can avoid paying the entire tax on the gain in the year of sale.

Question 20

A buyer does not have to withhold a portion of the sales price from a seller when

(a) the property is residential.
(b) the seller refuses to pay the withholding.
(c) the sales price does not exceed $100,000.
(d) None of the above

Answer 20

(c)the sales price does not exceed $100,000.

Question 21

Taxes charged in direct relation to property value are:

	(a) illegal.
	(b) paid annually.
	(c) ad valorem taxes.
	(d) paid upon a sale only.

Answer 21

(c) ad valorem taxes.

Question 22

The purpose of the property tax assessed value is to:

	(a) establish the base value.
	(b) equalize property taxes.
	(c) create the transfer tax rate.
	(d) ensure all counties are equal.

Answer 22

(a) establish the base value.

Question 23

The person responsible for determining assessed values is the:

	(a) county tax collector.
	(b) county supervisor.
	(c) sheriff.
	(d) county assessor.

Answer 23

(d) county assessor.

Question 24

The first property tax installment of the tax year is due on:

	(a) July 1
	(b) November 1
	(c) February 1
	(d) April 1

Answer 24

(b) November 1

Question 25

The second property tax installment is delinquent after:

	(a) December 10
	(b) February 1
	(c) April 10
	(d) May 16

Answer 25

(c) April 10

Question 26

Real property taxes become a lien on:

	(a) November 1
	(b) February 1
	(c) January 1
	(d) July 1

Answer 26

(c) January 1

Question 27

In California, the inheritance and gift taxes have been:

	(a) increased.
	(b) reduced.
	(c) combined.
	(d) abolished.

Answer 27

(d) abolished.

Question 28

Unless an extension is given, a federal income tax return must be filed for the preceding tax year by:

	(a) April 15
	(b) May 15
	(c) August 15
	(d) October 15

Answer 28

(a) April 15

Question 29

A personal residence and business equipment are considered:

	(a) personal property.
	(b) capital assets.
	(c) real property.
	(d) intangible property.

Answer 29

(b) capital assets.

Question 30

A principal residence must be occupied for how long to take advantage of the maximum exclusion of profit from taxable income?

	(a) One year
	(b) 18 months
	(c) Two years
	(d) Five years

Answer 30

(c) Two years