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AZ Real Estate Agent License 2020 > Settlement, Prorations, Investments 14 > Flashcards

Settlement, Prorations, Investments 14 Flashcards

1
Q

Income Remaining After the Operating Expenses (Deducted From) Effective Gross Income.

A

Net Operating Income -

Income Remaining After Operating Expenses (Deducted From) Effective Gross Income.

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2
Q

Detailed Accounting Prepared by Escrow, shows:

  1. Cashed Received
  2. All Charges Debit/Credit
A

Closing Statement

Detailed Accounting Prepared by Escrow shows:

  1. Cashed Received
  2. All Charges Debit/Credit

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3
Q

Proportional Division or Distribution of Funds (30 Days Used)

A

Prorations -

Proportional Division or Distribution of Funds (by 30 dys used)

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4
Q

Owner pays in Arrears - Debit or Credit?

  1. Real Estate Taxes (Arrears) - Seller ___ Buyer ____
  2. Interest on Loans (Arrears) - Seller ___ Buyer ____
  3. Water Bills (Arrears) - Seller ____ Buyer ____

Arrears - Means overdue payment

A

Owner pays in Arrears: (Debit Seller)

Seller Debit / Buyer Credit

  1. Real Estate Taxes (Arrears) - Seller Debit / Buyer Credit
  2. Interest on Loans (Arrears) - Seller Debit / Buyer Credit
  3. Water Bills (Arrears) - Seller Debit / Buyer Credit

Arrears - Means overdue payment

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5
Q

Owner pays in Advance

  1. Pre-paid Taxes (Advance) - Seller ____ / Buyer _____
  2. Insurance Premiums (Advance) - Seller ____ / Buyer ____
  3. HOA (Advance) - Seller ______ / Buyer _____
  4. Propane (Advance) - Seller ______ / Buyer ______
A

Owners pays in Advance: (Seller Credit)

  1. Pre-paid Taxes (Advance) - Seller Credit / Buyer Debit
  2. Insurance Premiums (Advance) - Seller Credit / Buyer Debit
  3. HOA (Advance) - Seller Credit / Buyer Debit
  4. Propane (Advance) - Seller Credit / Buyer Debit

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6
Q

Rental Properties:

  1. Prorated Rent - Seller ____ / Buyer _____
  2. Security Deposits - Seller _____ / Buyer _____
A

Rental Properties:

  1. Prorated Rent - (Seller Debit / Buyer Credit)
  2. Security Deposit - (Seller Debit /Buyer Credit)

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7
Q

Closing Cost: credit/debit to who (soley)?

  1. Loan Origination Fee - Buyer ______
  2. ALTA Title Insurance - Buyer _____
  3. Owner Policy - Seller _____
  4. Commission - Seller ______
  5. Escrow Fee - Seller _____/ Buyer _____
A

Closing Cost (debit/credit):

  1. Loan Origination - Buyer Debit
  2. ALTA Title Insurance - Buyer Debit
  3. Owner Policy - Seller Debit
  4. Commissions - Seller Debit
  5. Escrow Fee (Seller/Buyer Debits)

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8
Q

“Solely Credited” to Buyer and not shown on seller’s side

  1. E____ Money - Buyer Credit
  2. N___ L___ - Buyer Credit
A

“Solely Credited” to Buyer and not shown on seller’s side

  1. *Earnest Money: Buyer Credit
  2. *New Loan: Buyer Credit
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9
Q

All Closing Cost as - Seller Debit and Buyer Credit

  1. Seller C___b____: (Seller Debit / Buyer Credit)
  2. R___ C_____: (Seller Debit / Buyer Credit)
  3. Sec____ Dep____: (Seller Debit / Buyer Credit)
  4. T____ (Arrears): (Seller Debit / Buyer Credit)
  5. W____ (Arrears): (Seller Debit / Buyer Credit)

Seller Carryback - aka Purchase Money Loan. Seller becomes the Lender; Buyer the borrower. Used as loan to borrower for downpayment.

A

All Closing Cost as - Seller Debit and Buyer Credit

  1. Seller Carryback: (Seller Debit / Buyer Credit)
  2. Rent Collected: (Seller Debit / Buyer Credit)
  3. Security Deposit: (Seller Debit / Buyer Credit)
  4. Taxes (Arrears): (Seller Debit / Buyer Credit)
  5. Water (Arrears): (Seller Debit / Buyer Credit)

Seller Carryback - aka Purchase Money Loan. Seller becomes the Lender; Buyer the borrower. Used as loan to borrower for downpayment.

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10
Q

Closing Cost - Soley - Seller Debits

  1. **Com_____- Seller Debit
  2. **O____ T___ P____ - Seller Debit
A

All Closing Cost (Debit/Credit)

  1. **Commission: Debit Seller
  2. **Owner Title Policy: Debit Seller

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11
Q

Projected Rent if Property is 100% Occupied is called?

  • Contract Rent + Market Rent (Vacancies)
A

Gross Scheduled Income (Annual):

Projected Rent if Property is 100% occupied.

Contract Rent + Mkt Rent (Vacancies)

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12
Q

Units not rented are called?

A

Vacancies -

Units not rented

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13
Q

Rent which was owed by a tenant but not collected is?

A

Credit Losses -

Rent which was owed by a tenant but not collected

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14
Q

Actual Income Received After Deducting Vacancies and Credit Losses from the Gross Scheduled Income

  • Gross Schedule Income
  • - Vacancies
  • - Credit losses
  • =
A

Effective Gross Income -

Actual Income Received After Deducting Vacancies and Credit Losses from the Gross Scheduled Income

  • Gross Schedule Income
    • Vacancies
    • Credit losses
  • = Effective Gross Income

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15
Q

Income Props Operate Expenses - Not Mortgage (PI) /Depreciation:

  1. Pr___ Mgmt F___
  2. Rep____
  3. Main_____
  4. Ut______
  5. T___ and In______
  6. Ad_______
A

Inc Props Oper Expenses - Not Mortgage (PI)/Depreciation:

  1. Prop Mg Fee 4. Utilities
  2. Repairs 5. Tax/Ins
  3. Maintenance 6. Ads

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16
Q

The Principal and Interest Payments on the Loan.

A

Debt Service -

The Principal and Interest Payments on the Loan.

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17
Q

Amount Left after Operating Expenses and Debt Service Paid; Before Income Taxes. Formula:

  • Gross Schedule Income
  • - Vacancy and Credit Losses
  • = Effective Gross Income
  • Effective Gross Income - Operating Expenses
  • = Net Operating Income (NOI)
  • Net Operating Income - Debt Service (PI)
  • = What? (Before Income Taxes)
A

Cash Flow (Before Income Taxes) -

Amount Left after Operating Expenses and Debt Service Paid and Before Income Taxes

  • Gross Schedule Income (Proj Rents 100%)
  • - Vacancy (@ Market) and Credit Losses
  • = Effective Gross Income
  • Effective Gross Income - Operating Expenses
  • = Net Operating Income (NOI)
  • Net Operating Income - Debt Service (PI)
  • = Cash Flow (Before Income Taxes)

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18
Q

Income from Salaries, Wages, Commissions, and Interest.

A

Ordinary Income -

Income from Salaries, Wages, Commissions, and Interest.

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19
Q

Income Realized from the Sale of an Asset as a Profit.

  1. Short Term - Asset - L___ than _ Year
  2. Long Term - Asset - M___ than _ Year
A

Capital Gain Income -

Income Realized from the Sale of an Asset as a Profit.

  1. Short Term - Asset - 1 Year or Less
  2. Long Term - Asset - More than 1 year

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20
Q

Income “Taxed” from an Entity like LLC at Level of Individual (not at level of entity).

A

Pass-through Income -

Income “Taxed” from an Entity like LLC at Level of Individual (not at level of entity).

Chap 14

21
Q

Tax Deductions - for SFR Own Occupied/2nd Homes.

  1. Real Estate Property Taxes/Other Taxes - Upto to $_______ Max Deduction
  2. Interest on Loans - Upto $______**_ for **Purchase and Improvements
  3. Home Equity Loan (Interest) - Is N__ D______.

Tax Deductions = Property Taxes and Loan Interest

A

Tax Deductions - for SFR Own Occupied/2nd Homes -

  1. Real Estate Property Taxes/Other Taxes - Upto $10,000 Max Deduction
  2. Interest on Loans Upto $750,000 - for Purchase and Improvements
  3. Home Equity Loan (Interest) - Is Not Deductible.

Tax Deductions = Property Taxes and Loan Interest

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22
Q

Same Amount Recovery Deductions on Investments Every Year is called?

A

Straight Line Depreciation -

Same Amount Recovery Deductions on Investments Every Year

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23
Q

Capital Gain Excluded Amts -

Personal Residence Sale - Capital Gains Excluded from Taxes

  1. Single - $_____ Gain Excluded
  2. Married - $_____ Gain Excluded
  3. Must be Owner Occupied - __yrs/In past __yrs.
A

Capital Gain (Excluded Amts) -

Personal Residence Sale - Capital Gains Excluded from Taxes:

  1. Single - $250,000 Gain Excluded
  2. Married $500,000 Gain Excluded
  3. Must be Owner Occupied - 2 yrs/In past 5yrs.

Chap 14

24
Q

1031 Exchanges - Allows “Tax On Gain” to be Deferred into Future.

  1. Like Kind - In____ and Inv______ Properties.
  2. Simultaneous Exchange - One Property “T____ Dir____ for A_____ Property
  3. Delayed Exchange - New Pro____ Ac____ within S_pecific Time_ _Frames****._
  4. Boot - Un____ K___ Pr_____ Received in an Exchange.
A

1031 Exchanges - Allows “Tax On Gain” to be Deferred into Future.

  1. Like Kind - Income/Investment Properties.
  2. Simultaneous Exchange - One Property “Traded Directly for Another Property
  3. Delayed Exchange - “New Property Acquired” within Specific Time Frames.
  4. Boot - “Unlike Kind Property” Received in an Exchange.

Chap 14

25
Q

FIRPTA Foreign Investment In Real Property Tax Act

  1. Federal Law which Non-R_____ Al___ Must Pay US Income T__ G___ from the S___ of US Real Property.
  2. Escrow holds __% of Sales Price.
  3. Buyer Could Be Liable - for S___’s T__, if Not Withheld.
A

FIRPTA Foreign Investment In Real Property Tax Act

  1. Federal Law which Non-Residential Aliens must pay US Income Tax Gain from the Sale of US Real Property.
  2. Escrow holds 15% of Sales Price.
  3. Buyer Could Be Liable - for Seller’s Tax, if Not Withheld.

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26
Q

Investment Property - Tax Deductions -

  1. O______ Expenses (Prop Mg Fee, Repairs, Maint, Utilities, Ads, Tax/Ins)
  2. Int____ on Loans
  3. Cost Recovery (Depreciation):
  • Residential (Income) Property - ___ Yrs
  • Non-Residential Property - ___ Yrs
  • Land/Personal SFR - No Dep_____
  1. Straight Line Depreciation: Same Amt of “Depreciation” Every Year
A

Investment Property -Tax Deductions -

  1. Operating Expenses (Prop Mg Fee, Repairs, Maint, Utilities, Ads, Tax/Ins)
  2. Interest on Loans
  3. Cost Recovery (Depreciation):
  • Residential Income Property - 27.5 Yrs -
  • Non-Residential Property - 39 Yrs
  • Land/Personal SFR - No Depreciation
  1. Straight Line Depreciation: Same amount of “Depreciation” Every Year

Chap 14

27
Q

Allows “Tax Gain” to be Deferred in Future Years.

A

1031 Exchanges:

Allows Tax Gain to be Deferred in Future Years.

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28
Q

Properties held for “Income or Investment” in an Exchange?

A

Like Kind -

Properties held for “Income or Investment” in an Exchange.

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29
Q

Closing Cost: Credit/Debit to one side only?

  1. Loan Origination Fee - Buyer ______
  2. ALTA Title Insurance - Buyer _____
  3. Owner Policy - Seller _____
  4. Escrow Fee - Seller _____/ Buyer _____
A

Closing Cost Credit/Debit to one side only?

  1. Loan Origination (Buyer Debit)
  2. ALTA (Buyer Debit)
  3. Owner Policy (Seller Debit)
  4. Escrow Fee (Seller/Buyer Debits)

Chap 14

30
Q

If an Item Reduces the Cash the Buyer Must Bring to Closing, it is a Buyer (Credit or Debit)?

A

Buyer Credit -

If an Item Reduces the Cash the Buyer Must Bring to Closing, it is a Buyer Credit

Chap 14

31
Q

One property is traded “Directly for Another” property.

All Exchanges - tax on gain is deferred

A

Simultaneous Exchange -

One property is traded“Directly for Another” property.

All Exchanges - tax on gain is deferred

Chap 14

32
Q

1031 Exchanges - Allows “tax gain” to be deferred into future.

  1. Like Kind - In____ and Inv______ Properties.
  2. Simultaneous Exchange - One Property “T____ Dir____ for A_____” Property
  3. Delayed Exchange - New Pro____ Ac____ within Specific Time Frames.
  4. Boot - Un____ K___ Pr_____ Received in an Exchange.
A

1031 Exchanges - Allows “tax gain” to be deferred into future.

  1. Like Kind - Income/Investment Properties.
  2. Simultaneous Exchange - One Property “Traded Directly for Another” Property
  3. Delayed Exchange - “New Property Acquired” within Specific Time Frames.
  4. Boot - “Unlike Kind Property” Received in an Exchange.

Chap 14

33
Q

Federal Law which Non-Residential Aliens must pay “US Income Tax Gain” from the Sale of US Real Property. Escrow holds 15% of Sales Price. Buyer Could Be Liable for Seller’s Tax, if not withheld.

A

FIRPTA Foreign Investment In Real Property Tax Act

Federal Law which Non-Residential Aliens must pay “US Income Tax Gain” from the Sale of US Real Property. Escrow holds 15% of Sales Price. Buyer Could Be Liable for Seller’s Tax, if Not Withheld.

Chap 14

34
Q

“New Property Acquired” within Specific Time Frames.

All Exchanges - tax on gain is deferred

A

Delayed Exchange -

“New Property Acquired” within Specific Time Frames.

All Exchanges - tax on gain is deferred

Chap 14

35
Q

1031 Exchanges - Allows “tax gain” to be deferred into future.

  1. Like Kind - In____ and Inv______ Properties.
  2. Simultaneous Exchange - One Property “T____ Dir____ for A_____“ Property
  3. Delayed Exchange - New Pro____ Ac____ within specific time frames.
  4. Boot - Un____ K___ Pr_____ received in an exchange.
A

1031 Exchanges - Allows “tax gain” to be deferred into future.

  1. Like Kind - Income/Investment Properties.
  2. Simultaneous Exchange - One property “Traded Directly for Another” property
  3. Delayed Exchange - “New Property Acquired” within specific time frames.
  4. Boot - “Unlike Kind Property” received in an exchange.

Chap 14

36
Q

If an Item Reduces the Cash the Seller takes Home at Closing, it is a Seller (Credit or Debit)?

A

Seller Debit -

If an Item Reduces the Cash the Seller takes Home at Closing, it is a Seller Debit

Chap 14

37
Q

“Unlike Kind Property” Received in An Exchange.

All Exchanges - Tax on Gain is Deferred

A

Boot -

“Unlike Kind Property” Received in An Exchange.

All Exchanges - Tax on Gain is Deferred

Chap 14

38
Q

When New Financing used by Buyer, RESPA Requires Use of this Document, which “Details the Terms of the Loan,” Made to Buyer.

A

TRID Closing Disclosure -

When New Financing used by Buyer, RESPA Requires Use of this Document, which “Details the Terms of the Loan,” Made to Buyer.

Chap 14

39
Q

A Reduction in the Value of an Asset with the Passage of Time, Due to Particular Wear and Tear.

Note: Land/Personal Residence “C__ N___” be Depreciated.

A

Cost Recovery (Depreciation)

A Reduction in the Value of an Asset with the Passage of Time, Due to Particular Wear and Tear.

Note: Land/Personal Residence “CAN NOT” be Depreciated.

Chap 14

40
Q

Income & Commerical Props - Depreciation -Cost Recovery Periods

  1. Res Income Property - ___ yrs
  2. Non-Residential Property - ___ yrs
  3. Land/Personal SFR - __ yrs
A

Income & Commercial Props - Depreciation - Cost Recovery Periods

  1. Res Income Property - 27.5 yrs
  2. Non-Residential Property - 39 yrs
  3. Land/Personal SFR - 0 yrs - No Depreciation

Chap 14

41
Q

1031 Exchanges - Allows “Tax Gain” to be Deferred to Future.

  1. Like Kind - In____ and Inv______ Properties.
  2. Simultaneous Exchange - One Property “T____ Dir____ for A_____“ Property
  3. Delayed Exchange - New Pro____ Ac____ within Specific Time Frames.
  4. Boot - Un____ K___ Pr_____ Received in an Exchange.
A

1031 Exchanges - Allows “Tax Gain” to be Deferred to Future.

  1. Like Kind - Income/Investment Properties.
  2. Simultaneous Exchange - One Property “Traded Directly for Another” Property
  3. Delayed Exchange - “New Property Acquired” within Specific Time Frames.
  4. Boot - “Unlike Kind Property” Received in an Exchange.

Chap 14

42
Q

Same Amount Recovery Deductions on Investments Every Year is called?

A

Straight Line Depreciation -

Same Amount Recovery Deductions on Investments Every Year

Chap 14

43
Q

All Closing Cost (Debit/Credit)

  1. Sales Price - Seller _____ Buyer _____
  2. *Earnest Money - Buyer _____
  3. *New Loan - Buyer _____
  4. Slr Carryback - Seller ____ Buyer _____
  5. Rent Collected - Seller _____ Buyer ____
  6. Security Deposits - Seller _____ Buyer _____
  7. Taxes (Arrears) - Seller ____ Buyer _____
  8. Water (Arrears) - Seller _____ Buyer _____
  9. **Commission - Seller _____
  10. **Owner Title - Seller _____
  11. **ALTA - Buyer _____
  12. **Loan Orig Fee - Buyer _____
  13. **Impounds - Buyer ______
  14. Fuel Reserves - Seller ___ Buyer _____
  15. Prepaid Tax - Seller _____ Buyer ____
  16. Escrow Fees - Seller _____ Buyer ____
A

All Closing Cost (Debit/Credit)

  1. Sales Price: (Credit Seller/Debit Buyer)
  2. *Earnest Money: (Credit Buyer)
  3. *New Loan: (Credit Buyer)
  4. Seller Carryback: (Debit Seller/Credit Buyer)
  5. Rent Prorated: (Debit-Seller/Credit Buyer)
  6. Security Deposit: (Debit Seller/Credit Buyer)
  7. Taxes (Arrears): (Debit Seller/Credit Buyer)
  8. Water (Arrears) (Debit Seller/Credit Buyer)
  9. **Commission: (Debit Seller)
  10. **Owner Title: (Debit Seller)
  11. **ALTA: (Debit Buyer)
  12. **Loan Orig Fee - (Debit Buyer)
  13. **Impounds: (Debit Buyer)
  14. Fuel Reserves: (Credit Seller/Debit Buyer)
  15. Prepaid Tax (Credit Seller/Debit Buyer)
  16. Escrow Fees: (Debit Seller / Debit Buyer)
44
Q

FIRPTA stands for

For____ Inv_____ In Real Property T__ A__

A

FIRPTA

Foreign Investment In Real Property Tax Act

Chap 14

45
Q

“Unlike Kind Property” Received in an Exchange.

All Exchanges - tax on gain is deferred

A

Boot -

“Unlike Kind Property” Received in an Exchange

All Exchanges - tax on gain is deferred

Chap 14

46
Q

If an Item Reduces the Cash the Seller Takes Home at Closing, it is a Seller (Credit or Debit)?

A

Seller Debit -

If an Item Reduces the Cash the Seller Takes Home at Closing, it is a Seller Debit

Chap 14

47
Q

If an Item Reduces the Cash the Buyer Must Bring to Closing, it is a Buyer (Credit or Debit)?

A

Buyer Credit -

If an Item Reduces the Cash the Buyer Must Bring to Closing, it is a Buyer Credit

Chap 14

48
Q

Tax Advise -

Upon Purchase or Sale of Property, There Can be Significant I____ T__ Consequences. A Real Estate Licensee Should Advise Their Clients to S____ Competent Legal Advice from a Q_____ Ex____ (Tax Advisor).

A

Tax Advise -

Upon Purchase or Sale of Property, there can be Significant Income Tax Consequences. A Real Estate Licensee Should Advise Their Clients to Seek Competent Legal Advice from a Qualified Expert (Tax Advisor).

Chap 14

AZ Real Estate Agent License 2020 (23 decks)

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