UNIT 18

Question 1

To calculate the capital gain or loss in a real estate transaction

a. subtract the closing costs from the sales price.
b. add the closing costs to the purchase price.
c. subtract the adjusted basis from the amount realized.
d. subtract the amount realized from the adjusted basis.

Answer 1

c. subtract the adjusted basis from the amount realized

Question 2

A homeowner listed her real estate for sale at $100,000. If her cost was 80% of the listing
price, what will her percentage of profit be if her real estate is sold for the listing price?
a. 10%
b. 15%
c. 20%
d. 25%

Answer 2

d. 25%

$100,000 SP - $80,000 orig. price =
$20,000 profit ÷ $80,000 orig. price =
0.25 = 25%

Question 3

When preparing an annual income tax return, a homeowner may be able to deduct all of
the following EXCEPT
a. real estate taxes.
b. mortgage interest on a first home.
c. mortgage interest on a second home.
d. mortgage interest on a third home.

Answer 3

d. mortgage interest on a third home.

Question 4

A couple sold their vacation home for $412,500. If they made a profit of 10%, what was
the original cost of the property?
a. $360,000
b. $371,250
c. $375,000
d. $453,750

Answer 4

c. $375,000

$412,500 SP ÷ 1.10 [100% + 10%
profit] = $375,000 orig. price

Question 5

If a homeowner itemizes deductions when filing a federal income tax return, which of the
following expenses can probably be deducted?
a. Depreciation, if taken on a straight line basis
b. Principal payments on the home loan
c. Interest payments on the home loan
d. Maintenance and improvement costs

Answer 5

c. Interest payments on the home loan

Question 6

Homeowners will be able to avoid capital gains tax on the sale of their residence if they

a. are 55 years old or older.
b. have owned the home for two years or more.
c. have owned and occupied the home for two years or more.
d. are married.

Answer 6

c. have owned and occupied the home for two years or more.