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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.

Chap 14

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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

Chap 14

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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)

Chap 14

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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

Chap 14

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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

Chap 14

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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)

Chap 14

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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)

Chap 14

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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.

Chap 14

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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

Chap 14

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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)

Chap 14

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12
Q

Units not rented are called?

A

Vacancies -

Units not rented

Chap 14

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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

Chap 14

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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

Chap 14

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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

Chap 14

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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.

Chap 14

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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)

Chap 14

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18
Q

Income from Salaries, Wages, Commissions, and Interest.

A

Ordinary Income -

Income from Salaries, Wages, Commissions, and Interest.

Chap 14

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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

Chap 14

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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

Chap 14

22
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

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
**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.**
**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.** **Chap 14**
26
**_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**
**_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
Allows "**Tax Gain**" to be **Deferred in Future Years.**
**1031 Exchanges:** Allows **Tax Gain** to be **Deferred in Future Years.** **Chap 14**
28
**Properties** **held for "Income or Investment" in an Exchange?**
**Like Kind** - **Properties** held for "**Income or Investment"** **in an Exchange**. **Chap 14**
29
**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 \_\_\_\_\_**
**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
**If an Item Reduces the Cash the Buyer Must Bring to Closing, it is a Buyer (Credit or Debit)?**
**Buyer Credit** - ## Footnote **If an Item Reduces the Cash the Buyer Must Bring to Closing, it is a Buyer Credit** **Chap 14**
31
**One property is** **traded** **"Directly for Another" property.** All Exchanges - tax on gain is deferred
**Simultaneous Exchange** - **One property is traded**"**Directly for Another"** property. All Exchanges - tax on gain is deferred **Chap 14**
32
**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**.
**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
**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.**
**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
**"New Property Acquired" within Specific Time Frames.** All Exchanges - tax on gain is deferred
**Delayed Exchange -** **"New Property** **Acquired" within Specific Time Frames.** All Exchanges - tax on gain is deferred **Chap 14**
35
**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.
**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
**If an Item Reduces the Cash the Seller takes Home at Closing, it is a Seller (Credit or Debit)?**
**Seller Debit** - ## Footnote **If an Item Reduces the Cash the Seller takes Home at Closing, it is a Seller Debit** **Chap 14**
37
**"Unlike Kind Property" Received in An Exchange.** All Exchanges - Tax on Gain is Deferred
**Boot -** **"Unlike Kind Property" Received in An Exchange.** All Exchanges - Tax on Gain is Deferred **Chap 14**
38
**When New Financing used by Buyer, RESPA Requires Use of this Document, which "_Details the Terms of the Loan_," Made to Buyer.**
**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
**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.**
**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
**_Income & Commerical Props_ - Depreciation -Cost Recovery Periods** 1. **Res Income Property** - **\_\_\_ yrs** 2. **Non-Residential Property** - **\_\_\_ yrs** 3. **Land/Personal SFR - __ yrs**
**_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
**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.**
**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
**Same Amount Recovery Deductions _on Investments_ Every Year** is called?
**Straight Line Depreciation -** **Same Amount Recovery Deductions _on Investments_ Every Year** **Chap 14**
43
**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 \_\_\_\_
**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
**FIRPTA stands for** **For\_\_\_\_ Inv\_\_\_\_\_ In Real Property T\_\_ A\_\_**
**FIRPTA** Foreign Investment In Real Property Tax Act **Chap 14**
45
**"Unlike Kind Property"** **Received in an Exchange.** All Exchanges - tax on gain is deferred
**Boot -** **"Unlike Kind Property**" **Received in an Exchange** All Exchanges - tax on gain is deferred **Chap 14**
46
**If an Item Reduces the Cash the Seller Takes Home at Closing, it is a Seller (Credit or Debit)**?
**Seller Debit** - ## Footnote **If an Item Reduces the Cash the Seller Takes Home at Closing, it is a Seller Debit** **Chap 14**
47
**If an Item Reduces the Cash the Buyer Must Bring to Closing, it is a Buyer (Credit or Debit)**?
**Buyer Credit** - ## Footnote **If an Item Reduces the Cash the Buyer Must Bring to Closing, it is a Buyer Credit** **Chap 14**
48
**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).**
**Tax Advise** - ## Footnote **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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