Chapter 2.5 Quiz (8% Of The Exam)

November 1 - first installment due, December 10 - first installment delinquent & February 1 - second installment due, April 10 - second installment delinquent

NDFA - No Darn Fooling Around

Property is normally reassessed for property tax purposes whenever the property is sold. This means that when a property changes ownership, its value is reassessed to determine the new property tax amount. Reassessment is necessary because the value of a property can change over time, and the tax amount should reflect the current market value. Reassessing only when the property is sold ensures that the tax assessment is fair and up-to-date.

Residential is 27.5 years minimum and Commercial is 39 years minimum

In a sale-leaseback the owner sells the property to an investor. The investor then leases the property back to the prior owner The prior owner stays in possession and becomes a tenant, holding a less-than-freehold estate

A grant deed contains two implied warranties: (1) the estate is free from undisclosed encumbrances and (2) the grantor has not conveyed title to any other person

A 36 mile square measures 36 miles by 3 miles and contains 36 townships.

In a properly prepared escrow closing statement, the purchase price would appear as a debit to the buyer. This means that the buyer owes the purchase price amount. Debits represent amounts owed, while credits represent amounts received. Therefore, the buyer is debited for the purchase price because they are responsible for paying it.

The correct answer is "all of the above" because ownership of real estate under the federal income tax law provides several benefits. Depreciation allows owners to deduct a portion of the property's value over time, reducing taxable income. A 1031 tax deferred exchange allows owners to defer capital gains taxes by exchanging one investment property for another. An installment sale allows owners to spread out the recognition of income from the sale of a property over multiple years. Therefore, all three options mentioned (depreciation, 1031 tax deferred exchange, and installment sale) are benefits of real estate ownership under the federal income tax law.

Recording a "declaration of homestead" has no impact on property taxes.

The Street Improvement Act of 1911 allows special assessments to be levied for various purposes, such as new drainage and sewer systems, building off-site local improvements, and improving street lighting. However, the act does not specifically mention using the assessments to purchase vacant land. Therefore, purchasing vacant land is not a permissible use of the special assessments under the Street Improvement Act of 1911.

Special assessments are levied for the cost of specific local improvements, while property tax revenue goes into the general fund. This means that special assessments are specifically collected to fund particular projects or improvements in a local area, such as road repairs or park development. On the other hand, property taxes are collected from all property owners in a jurisdiction and are used to fund general government operations and services. Therefore, the main difference between property taxes and special assessments lies in their purpose and allocation of funds.

Tenancy in common refers to a situation where two or more individuals own a property together, with each person having an undivided interest in the property. Unlike joint tenancy, there is no right of survivorship, meaning that if one owner passes away, their share of the property will not automatically pass to the other owners. This type of ownership allows for unequal shares and each owner has the right to transfer or sell their share independently.

A title insurance policy insures title as of the date or transfer of title. The death of the policy holder (buyer) does not terminate the title insurance company's obligation to insure marketable title was present at the time of the transfer.

Once all the conditions of escrow have been satisfied, the escrow officer becomes a separate agent for each party, whereas during escrow, the escrow officer was a dual agent for both parties

The marginal tax rate refers to the rate at which an individual's next dollar of income will be taxed. It is not the total income tax that a person must pay, nor is it the minimum income tax rate. Instead, it specifically determines the tax rate that will be applied to any additional income earned.

The seller of one-to-four dwelling units subject to a Mello-Roos lien must make a good faith effort to obtain a disclosure notice concerning the special tax and give notice to a prospective buyer.

Cost basis is the actual purchase price

The correct answer is that the homeowner may not deduct the loss on the sale of his personal residence from his income tax. This is because losses on the sale of personal residences are not tax deductible for federal income tax purposes.

Minimum depreciation periods: residential is 27.5 years minimum and commercial is 39 years minimum

A grant deed is considered executed once it has been signed by the grantor. This means that the grantor has formally agreed to transfer ownership of the property to the grantee. The other steps mentioned, such as delivering the deed to escrow, recording it, and delivering it to the grantee, are important subsequent actions, but the actual execution of the deed occurs when the grantor signs it.

"metes" are measures of length, and "bounds"" are measures of boundaries

When a broker or escrow is holding a client's money and the clients get into a dispute over the money, it is appropriate for the broker or escrow to file an interpleader action in court. The interpleader action asks the court to decide the dispute between the parties to a contract.

A "tax shelter" is an investment such as real estate which for income tax purposes allows an investor to defer payment of taxes on current income to a later year

Land cannot be depreciated under federal income tax law. This is because land is considered a non-depreciable asset. Depreciation is only applicable to assets that have a limited useful life, such as buildings or equipment. Land, on the other hand, is considered to have an indefinite useful life and its value is expected to appreciate over time rather than depreciate. Therefore, the cost of land cannot be deducted as an expense for tax purposes.

Brandon should exchange his apartment complex for a more valuable apartment complex, assuming a larger loan and paying cash boot to balance the equities. This is because in a like-kind exchange, Brandon can defer paying income taxes if he exchanges his property for a similar or more valuable property. By assuming a larger loan and paying cash boot, Brandon can balance the equities and potentially avoid paying income taxes in the year of the exchange.

Must be owner occupied

A problem with a warranty deed results in a claim against a seller who may lack the ability to pay. A claim against a title insurance company to enforce a title policy is far more likely to be enforceable.

The consideration is the selling price minus existing loans assumed by the buyer.
$90,750 (selling price) - $30,000 (existing assumed loans) = $60,750 (consideration)
$60,750 divided by $500 = 121.5 taxable units
The tax rate is $.55 for each $500 of consideration + $.55 for any fraction of $500, therefore you multiply $.55 X 122 taxable units = $67.10

In a sale-leaseback transaction, the buyer of a commercial building is least concerned with the seller's depreciated book value of the improvements. The buyer's main focus would be on factors that directly affect the property's value and potential for generating income, such as access to transportation, zoning regulations, and the physical condition of the improvements. The seller's depreciated book value is a financial metric that reflects the historical cost of the improvements, but it does not necessarily reflect their current market value or income potential, which are more relevant to the buyer.