Tax bill uses an assessor's parcel number not a legal description (True or false)

Question 1

Tax bills uses an assessor’s parcel number not a legal description ( True or False)

Answer 1

True

Question 2

One advantage of an installment sell for federal income tax purposes is that

a) the gain from the sale will be recognizing the year of the sale
b) no taxes are due for the year of the sale
c) successive payments on the gain from the sale will be at the same Tax rate
d) the gain realized will be taxed in the year it was received

Answer 2

Answer D, an advantage of an installment sale is that at the seller’s may now designate how they are going to receive the gains and they will be taxed on those gains in the year in which they are received

Question 3

Income tax is a progressive tax (true or false)

Answer 3

True

Question 4

Sales tax is a tax on tangible personal property (true or false)

Answer 4

True

Question 5

Under the present method of establishing federal income tax rates, the rate

a) increases at their monthly tax increases
b) remains fixed regardless of the amount to be taxed
c) decreases as the amount of additional income declared under capital gains increases

Answer 5

Answer A, income tax are progressive as a person earns more money his or her tax rate increases

Question 6

Federal income tax purposes a taxpayer could adjust the cost of his or her personal residence for which of the following items?

a) depreciation
b) interest on a loan
c) fire insurance premiums paid
d) the addition of a concrete patio

Answer 6

Answer D, the addition of a patio would be the capital improvement have to cost basis in arriving at the adjusted cost basis

Question 7

Local tax assessors assess the value of each property thus determing the tax base. Properties are only reassessed upon sale which frequently results in a supplemental tax (true or false)

Answer 7

True

Question 8

Real property improved with a new apartment building cost $160,000. The cost of the land is $30,000. It is estimated that the improvement will have an economic life of 30 years. Using straight-line depreciation the book value of this real property at the end of 11 years would most nearly be

a) $112,000
b) $101,300
c) $82,300
d) $121,000

Answer 8

Answer A,

1) $1160,000 Property value-$30,000 Land value=$130000 Building value
2) Building Value $13000/30(years)=$4,333 (annual depreciation)
3) $4,333(Annual depreciation) X 11 years+$47,663(Accrued depreciation)
4) $160,000(Property value) -$47,6333(Accrued depreciation)=$112,337 (Book value at the end of 11 years)

Question 9

Mrs Jones wishes to exchange a property she has that is valued at $40,000 and is encumbered with a $32,000 first trust deed for Mr. Smith property that is valued at $61,000 and encumbered with a $48,000 first trust deed. If they assume each other’s loan approximately how much cash consideration will Mrs. Jones have to pay Mr. Smith

a) $5000
b) $8100
c) $9100
d) $15,500

Answer 9

Answer A

1) $40,000-$32000=$8000 (equity)
2) $61,000-48,000=$13,000 (equity)
3) $13,000-8000=$5000 (difference in equities)

Question 10

The annual property taxes an owner of a home must pay are determined by

a) assessing the land and the improvements separately and then multiplying by one tax rate
b) assessing the land and improvements together then multiplying by one tax rate
c) assessing the land and improvements separately and then multiplied by a different tax rate
d) none of the above

Answer 10

Answer A, A separate assessed value is determined for land and improvements. However, one tax rate is applied to the total assessed value of land and improvements.
Assessed value X tax rate - Taxes($).

Question 11

Effective gross income is the:

a) spendable income after taxes
b) gross income minus an allowable expenses and payments of principles and interest
c) gross income minus an allowance for vacancies
d) gross income minus allowable expenses and depreciation

Answer 11

Answer C, effective gross income is the term used to indicate the amount remaining after deducting vacancies from the gross income

Question 12

A homeowner can deduct a portion of which of the following as an expense for income tax purposes?

a) remodeling
b) painting a bedroom
c) depreciation
d) uninsured loss by theft of a garage door

Answer 12

Answer D, a homeowner can only deduct the property taxes, interest payments and a portion of any uninsured casualty losses

Question 13

For income tax purposes what do you subtract from the selling price to find the capital gain?

Answer 13

Answer, the adjusted cost basis,

Establish selling price $100,000 Sales Price
-$6000 cost of sale
=$94,000 adjusted selling price

Established cost basis $40,000 purchase price
$10,000 capital improvement
$6000 depreciation
=$44,000 adjusted cost basis

Established gain or loss $94,000 adjusted selling price
44,000 adjusted cost basis
= $50,000 capital gain

Question 14

According to income tax laws, which of the following is true about description of land

a) land has a residual value but improvements do not
b) The ACRS method of depreciation can be used when depreciating land
c) land is considered to be 25% of the total value and is depreciated
d) land is not depreciated

Answer 14

Answer is D, ( Land does not depreciate)

Question 15

Boot is used to balance the equities in property exchanges (true or false)

Answer 15

True

Question 16

Quite often a broker represents both parties any tax-free exchange and may receive commissions from both parties here she is acting as a

a) consultant
b) a tax code advisor
c) a dual agent

Answer 16

Answer is C, a dual agent

Question 17

Daniel taxes on the property are $400 since a total cannot exceed 1% of the full cash value of the property the full cash value the property would be

a) $10,000
b) $20,000
c) $40,000
d) $80,000

Answer 17

Answer is C

$400.00 / 1%=40,000

Question 18

The tax which the city may levy against a real estate brokerage firm based on its gross receipts would be a

a) sales tax
b) use tax
c) documentary transfer tax
d) business license tax

Answer 18

Answer is D, some cities charge business tax based upon their gross receipts

Question 19

As a general rule, which of the following sources would be least satisfactory in providing a legal description for a parcel of a real property

a) deeds
b) preliminary title report’s
c) policies of title insurance
d) bills for real property taxes

Answer 19

Answer is D, County tax assessor uses a different description Assessors Parcel Number (APN) for the various parcels that are being tax. He or she does not use a legal description

Question 20

A new well in the pump or install in a vacant parcel of land. For assessment purposes, the tax assessor will consider these as

a) improvements
b) additions
c) part of the land value
d) personal property

Answer 20

Answer is A, even though the well and pump are put in the ground, the tax assessor classifies these as improvements.

Question 21

If a person owns two personal residence and sales one and buys another one under conditions that comply with the gain deferral rules, which of the following is true?

a) the person assembled residence in order to qualify for deferral
b) only the residence that has greater value can use the deferral rules
c) deferral of the gain can only be done on the principal place of residence
c) deferral of the gain can be used for either residence

Answer 21

Answer is C,

Question 22

A man sold his personal residence $138,000. Two weeks later he purchase another residence for hundred $136,870. The purchase of his first residence was $120,000. For his income tax records, which of the following would be the basis of the second home and the taxable gain on these transactions?

a) basis $120,000: taxable gain $1130
b) basis $18,000: taxable gain $1130
c) basis $138,000: taxable gain $16,870
d) basis $16,870: taxable gain $18,000

Answer 22

Answer is A

Question 23

Mrs. Smith who owns an apartment sustained a $3000 operation loss for the tax year. For income tax purposes she may

a) deduct only $1000 of loss on her income tax return
b) offset the loss against any capital gains
c) deduct the full amount from her ordinary income
d) deduct only one half of the loss from her ordinary income

Answer 23

Answer is C

Question 24

John sold a property to Sam on an installment sale for income tax purposes. The buyer assumes an existing loan, which exceeded John’s basis in the property. John does have loan relief (excess mortgage over basis) the excess amount must be

a) deducted from the basis
b) may be part of the sales price
c) added to the basis
d) made a part of the down payment whether cash was received or not

Answer 24

Answer is D

Question 25

Simpson only triplex valued at $160,000, with an adjusted basis of $70,000, King owned a duplex valued at $150,000. Both properties were owned free and clear. They change their properties with King giving Simpson $5000 in cash. For federal income tax purposes

a) both will be taxed on the difference between the values and the basis
b) King has a taxable gain
c) Simpson has a recognized gain
d) neither has a taxable gain

Answer 25

Answer is C

Question 26

In which of the following situation would an IRS section 1030 exchange not be allowed

a) the properties are not of a like kind
b) exchange properties are both vacant land
c) one of the properties is a leasehold over 30 years
d) one property is in California and the other is in Arizona

Answer 26

Answer is A

Question 27

Which of the following would not be subject to property tax

a) mobile homes properly installed on permanent foundation
b) Vacant land located in an unincorporated area of the country
c) intangible personal property
d) possessory interest of the lessees in tax-exempt public property such as leases on oil and gas properties

Answer 27

Answer is C

Question 28

Owner of a property thinks that her property has been over assessed by the County assessor’s office she would contact

a) Department of real estate
b) Board of Supervisors
c) assessment appeals board
d) County tax collector

Answer 28

Answer is C

Question 29

An investor who suffers a loss on the sale of an apartment can deduct what part income tax purposes?

a) he can offset against any other Looking to write off a maximum of $3000 ordinary income
b) he cannot write off loss
c) all losses can be deducted
d) none of the above

Answer 29

Answer is A

Question 30

During the sale of a personal residence, the question arises concerning the seller’s ability to take the one time Exclusion based on the over 55-year-old rule. The broker should

a) inform the seller all they have to do is be over 55 years old and have lived in the home for at least three of the last five years
b) if the seller a copy of the IRS regulation covering this tax exclusion
c) encourage the seller to consult with a real estate attorney or other qualified consultant to ascertain any tax benefits or liabilities and concerning the sale of the property
d) get a disclaimer from the seller before giving any advice on taxes

Answer 30

C C is the correct answer, although A might be a correct statement depending on the seller’s status. However, it is not the proper response since there could be facts the broker does not know about the sellers tax situation

Question 31

Which of the following best defined spendable income for an owner occupied apartment building?

a) Net operating income minus principal and interest payments minus applicable income tax
b) Net operating income minus depreciation and charges for loan service
c) Gross income minus vacancy and collection losses
d) Net operating income plus principal payments

Answer 31

Answer is (A)

Question 32

A statutory right exists for the owner to redeem tax delinquent real property for how long after the date of the notice of intent to sell?

a) 90 days
b) One year
c) Three years
d) Five years

Answer 32

Answer is D

Question 33

What would be the value four Plex rental property each unit rented for $206.25 per month, vacancies were 5% of gross rents, operating expenses were $4140 per year and the net earns represented and 8% return on the investment

a) $68,812.50
b) $88,400
c) $71,484
d) $72,000

Answer 33

Answer is A
1) $206.25 (Rent Per Unit) X 4 (# of Units) =$825 (total rent per month)
2) $825 X 12= $9900 (annual rent)
3) $9900 X .95 (100%-5% vacancies)= $9405 (effective gross)
4) $9405- $4140 (expenses) = $5265 (net income)
5 $5265 / .08 (rate of return) = $65,812.50

Question 34

A high-rise office building has a quarterly income $265,000. Expenses amount to 32% of income what is the annual net income?

1) $180,200
2) $720,800
3) $106,000
4) $349,800

Answer 34

Answer is B,
1 $265,000 (quarterly income) X 4= $1,060,000 (annual income)
2 $1,060,000 X .68(100%-32% expenses)= $720,800 (net income)

Question 35

$73,700 and this was 17% more than what they paid for it purchase price was most nearly

a) $58,380
b) $61,920
c) $62,992
d) $65,420

Answer 35

Answer is C, $73,700 / 1.17= $62,991.45

Question 36

In a four Plex each apartment rented for $68.75 per month. The annual expenses of the property were $1380 and the appraiser determined that vacancy losses amount to 5% of the gross. If he selected and 8% Rate the value of the property would be

a) $14,400
b) $19,200
c) $21,900
d) $24,000

Answer 36

Answer is C,

1) $68.75 X 4= $275
2) $275 X 12= $3300
3) $3300 X .05 = 165
4) $3300-16511380=$1755
5) $1755 / .08= $21,937.50

Question 37

What does TIMMUR mean?

Answer 37

Property taxes, insurance, management, maintenance, utilities, and replacement reserves

Question 38

Taxpayers relief act of 1977 allows a single person to defer taxes on capital gains on the sale of a personal residence of up to 250,000 or 500,000 for married couples as long as the residence had been the seller’s primary residence two of the previous 5 years. The two years do not have to be consecutive
(true or false)

Answer 38

Answer is true

Question 39

What does No Darn Fooling Around Mean?

Answer 39

Tax payment schedule
November 1 first installment date
December 10 first installment delinquent 
February 1 second installment due
April 1 second installment delinquent