Unit 18: Taxes Affecting Real Estate Flashcards
True/False Ad valorem means according to cost.
False. Ad valorem means according to value. Real estate taxes (commonly called property taxes) are based on the value of real property, hence the term ad valorem tax.
True/False Property taxes are paid in arrears.
True. Property taxes are not due until November 1 and do not become delinquent until April 1 of the following year.
True/False The first step in the property tax protest procedure is to file an appeal with the Value Adjustment Board.
False. The first step in the property tax protest procedure is to seek an adjustment by contacting the county property appraiser.
True/False Property owned by nonprofit organizations is classified as immune property.
False. Property belonging to churches and nonprofit organizations is classified as exempt property.
True/False Government buildings are immune properties—that is, government buildings are NOT subject to taxation.
True. Immune properties are government buildings (city, county, state, and federal government properties) plus special categories that have been made immune by a statute or ordinance, such as municipal airports. Immune properties are not even assessed and are not subject to taxation.
True/False Floridians who have a homestead with an assessed value above $75,000 and who reside on the property as their permanent legal residence are eligible for a $50,000 homestead tax exemption.
True. Homeowners are entitled to a $25,000 homestead exemption from the assessed value of the home for city, county, and school board taxes. Homesteaders with assessed values greater than $75,000 are entitled to an additional $25,000 exemption from city and county taxes (but not school board taxes).
True/False The just value of homesteaded property in Florida may increase a maximum of 3% annually.
True. The just value of homesteaded property may be increased by the lesser of 3% annually or the percentage change of the Consumer Price Index.
True/False The purpose of Florida’s Green Belt Law is to protect coastal property from commercial development.
False. Florida’s Green Belt Law was designed to protect farmers from having property taxes increased just because the land might be in the path of urban growth and therefore well suited for development.
True/False Homeowners who have had the homestead exemption on their current home in the preceding year can transfer their SOH benefit to a new home.
True
True/False Property taxes become a lien on January 1 and are junior to mortgage liens.
False. Property taxes constitute a lien superior to all other liens on real property. Property taxes become a lien on January 1 each year.
The city is petitioned to pave the streets in a neighborhood. The paving cost is $32 per foot, and the city is to pay 25% of the cost. There are homes on both sides of the streets to be paved. If the lot frontage on the street is 105 feet, the special assessment for the street paving for this homeowner is
A) $1,260.
B) $2,520.
C) $3,360.
D) $630.
A) $1,260. 105 front feet × $32 per foot = $3,360; $3,360 × .75 (owner’s share of cost is 100% – 25%) = $2,520. $2,520 ÷ 2 (one-half of the street paving cost) = $1,260.
True/False The maximum rate of interest paid on a tax certificate is based on the prior year’s Consumer Price Index.
False. The bidding on tax certificates starts at 18% and goes down; therefore, the maximum rate paid on a tax certificate is 18%.
True/False Special assessments are levied according to the value of a property.
False. Special assessments are one-time taxes levied on properties to help pay for public improvements that benefit the property. Special assessments are not ad valorem taxes; they are not levied according to the value of a property. Usually, special assessments are levied on a front-foot basis for items such as sidewalks and street paving. They are often levied on a per hookup basis for utility and sewer improvements.
True/False Mortgage origination fees (points) paid on a refinance mortgage loan are deductible in the year they are paid.
False. Points paid when refinancing a loan must be deducted over the life of the loan.
True/False The exclusion of gain from the sale of a principal residence is up to $500,000 of gain for married couples who file a joint return.
True. The exclusion of gain from the sale of a principal residence is up to $250,000 of gain, or up to $500,000 of gain for married couples filing a joint return, provided the taxpayer-homeowner had occupied the residence for at least two of the last five years.
A homeowner originally purchased a new home for $325,000. During the period of ownership, the homeowners spent $25,000 in capital improvements. The homeowners sold the home 15 years later for $449,900. The homeowners paid a brokerage fee of 5% of the sale price and paid out-of-pocket closing costs totaling $3,250. What is the homeowners’ capital gain from the sale?
A) $125,645
B) $96,650
C) $77,405
D) $74,155
D) $74,155. Solution: $449,900 sale price × .05 = $22,495 broker commission. $449,900 – $22,495 – $3,250 closing costs = $424,155 amount realized from sale. $325,000 purchase price + $25,000 capital improvements = $350,000 adjusted basis. $424,155 – $350,000 = $74,155 capital gain.
True/False When purchasing real estate in the U.S. from a foreign seller, the purchaser is required to withhold up to 15% of the amount realized on the sale.
True. Persons purchasing real property in the U.S. from foreign sellers are required to withhold up to 15% of the amount realized on the sale.
True/False A short-term capital gain is the sale of an asset held for less than 12 months.
True. Capital gains (and losses) are either short term (the asset is held for less than 12 months) or long term (the asset is held for more than 12 months).
True/False The IRS useful asset life of nonresidential income-producing property is 27.5 years for calculating depreciation allowance
False. The useful life of nonresidential income-producing property is 39 years. The useful life of residential rental property is 27.5 years.
is a means of deducting the cost of improvements to land over a specified time. The land itself is not depreciable. Depreciation is calculated using the straight-line method; an equal amount is taken annually over the useful life of the asset. The IRS has established the useful life of 27.5 years for residential rental property and 39 years for nonresidential income-producing property.
Depreciation
Deductions from taxable income on investment property include
operating expenses (but not reserve for replacements), financing expense, and depreciation.
is the value of a property established for property tax purposes. Property owners use a three-step procedure to protest the assigned assessed value: (1) contact the county property appraiser, (2) appeal to the Value Adjustment Board, and (3) file a suit in court (certiorari proceeding).
Assessed value
True/False Property taxes are payable for the current year on or after November 1. Unpaid property taxes become delinquent on April 1 of the following year.
True
Which statement is FALSE regarding property taxes?
A) Property taxes become a lien on all real estate in Florida on January 1 each year.
B) Property taxes for the previous year are due on November 1.
C) Ad valorem tax means according to value.
D) The county property appraiser assesses all real property within the county.
B) property taxes for the previous year are due on November 1. Property taxes are due November 1 for the current year. Property taxes are paid in arrears, meaning that although they are assessed on January 1, the bill is not due until November 1 of the same year.
