Income Taxation And Transfer Of Title

50 Questions | Total Attempts: 58

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Tax Quizzes & Trivia

Chapter 3 Income Taxation and Transfer of Title


Questions and Answers
  • 1. 
    What percent of a capital gain would be the tax if an investor who is in the 28 percent tax bracket held the property for 12 1/2 months?
    • A. 

      12 1/2 %

    • B. 

      20%

    • C. 

      25%

    • D. 

      28%

  • 2. 
    A spot survey differs from other surveys in that it shows:
    • A. 

      Longitude and latitude

    • B. 

      Only the approximate location

    • C. 

      The location of improvements, easements and encroachments

    • D. 

      That it is a true copy of a prior physical survey

  • 3. 
    A standard policy of title insurance covers:
    • A. 

      Defects that would be revealed by a correct survey

    • B. 

      Rights of parties in possession

    • C. 

      Zoning restrictions

    • D. 

      Incompetent grantors

  • 4. 
    J died intestate and without heirs.  The state took title to J's property by:
    • A. 

      Dedication

    • B. 

      Escheat

    • C. 

      Police power

    • D. 

      Eminent domain

  • 5. 
    J paid $190,000 for her home in 1989.  She spent $41,000 on improvements to the home.  She sold the home in 1994 for $184,000 and incurred closing costs of $11,900.  J has:
    • A. 

      A tax loss of $17,900

    • B. 

      A tax loss of $35,100

    • C. 

      A tax loss of $47,900

    • D. 

      No loss for tax purposes

  • 6. 
    A warranty deed contains a covenant of further assurance, which means that:
    • A. 

      The grantor promises to indemnify the grantee for any loss suffered because of failure of title

    • B. 

      The grantor warrants the property is free of liens and encumbrances other than those stated in the deed

    • C. 

      The grantor warrants he or she has rightful ownership

    • D. 

      If any further instrument or act is needed to perfect title, the grantor promises to provide it.

  • 7. 
    A high rate of inflation would be of greatest value to investors who have:
    • A. 

      Invested in long term, fixed income investments

    • B. 

      Purchased property without the use of leverage

    • C. 

      Purchased property using moderate leverage

    • D. 

      Purchased property using a high degree of leverage

  • 8. 
    An owner has a passive loss of $25,000 on an investment property.  If the owner has an adjusted gross income of $125,000 how much of this loss can be used to shelter other than real estate income?
    • A. 

      $0

    • B. 

      $12,500

    • C. 

      $25,000

    • D. 

      $50,000

  • 9. 
    J traded her commercial lot to K for raw acreage.  K gave J $10,000 to balance out the trade.  Based on the above:
    • A. 

      Both parties will pay tax because the trade was not like for like

    • B. 

      J will be taxed on $10,000

    • C. 

      K will be taxed $10,000

    • D. 

      The trade would defer all taxes

  • 10. 
    The act of signing a deed would be the :
    • A. 

      Execution

    • B. 

      Ratification

    • C. 

      Verification

    • D. 

      Habendum

  • 11. 
    T recorded an approved subdivision map that showed that certain areas of the subdivision were being dedicated to public use.  this would be regarded as
    • A. 

      The exercise of police power

    • B. 

      Eminent domain

    • C. 

      Statutory dedication

    • D. 

      Inverse condemnation

  • 12. 
    L and M a married couple, sold their home for $2,400,000. When they purchased the home 7 years previously, they paid $1,200,000.  Assuming no improvements were, their taxable gain would be:
    • A. 

      Nothing

    • B. 

      $700,000

    • C. 

      $1,200,000

    • D. 

      $1,900,000

  • 13. 
    After meeting the statutory requirements of adverse possession, an adverse user could obtain marketable title by:
    • A. 

      Tacking on

    • B. 

      Continued open notorious and hostile use

    • C. 

      A quiet title action

    • D. 

      Inverse condemnation

  • 14. 
    A property was declared unfit for occupancy and was boarded up.  This action was a(n):
    • A. 

      Eminent domain

    • B. 

      Inverse condemnation

    • C. 

      Exercise of police power

    • D. 

      Statutory dedication

  • 15. 
    G gave a deed to H for valuable consideration.   Because H did not take possession or record the deed:
    • A. 

      H would have greater right than a later purchaser from G who records first

    • B. 

      If G later gave a gift deed to J, J's rights would be greater than H's rights

    • C. 

      The deed would be void

    • D. 

      Between G and H, H has good title

  • 16. 
    What is an abstract for a property?
    • A. 

      Policy of title insurance

    • B. 

      Condensation of every recorded document dealing with the property

    • C. 

      Opinion of title

    • D. 

      Commitment to issue a title policy

  • 17. 
    In which clause in a deed would the phrase to have and to hold appear?
    • A. 

      Safety clause

    • B. 

      Habendum clause

    • C. 

      Execution clause

    • D. 

      Description clause

  • 18. 
    On the same day, J deeded the same vacant lot to K, L and M in that order.  M was the first to record, followed by K and L.  Who has superior rights to the property
    • A. 

      K because K was the first purchaser

    • B. 

      M because M was the first to record

    • C. 

      K, L, and M take equal shares as a matter of equity

    • D. 

      J retains title because J's fraud cannot pass title

  • 19. 
    J, who paid $47,000 for a property,  has since refinanced the property.  The present balance on the mortgage is $128,000.  If J sold the property for $95,000, what would be the tax consequence of the sale?
    • A. 

      J would have a loss of $33,000

    • B. 

      J would have a gain of $48,000

    • C. 

      J would have a gain of $81,000

    • D. 

      J would have a gain of $128,000

  • 20. 
    An investor has total cash obligations of $187,000 on a property with an income of $225,000.  The $38,000 difference is known as:
    • A. 

      Cash flow

    • B. 

      Equity

    • C. 

      Arbitrage

    • D. 

      Liquidity

  • 21. 
    Q intends to borrow $80,000 on her home at 9 percent interest to pay off credit card loans.  as to this home equity loan, Q should realize that the:
    • A. 

      Loan will increase her tax liability in the event of a sale

    • B. 

      Interest payments on the home equity loan may be tax deductible

    • C. 

      Cost basis of the home will be increased by $80,000

    • D. 

      $80,000 in proceeds is subject to regular income taxation

  • 22. 
    The purchaser's down payment is considered what type of funds?
    • A. 

      Borrowed

    • B. 

      Leveraged

    • C. 

      Equity

    • D. 

      Capital

  • 23. 
    For tax purposes, residential property is depreciated based on a life of
    • A. 

      15 years

    • B. 

      27.5 years

    • C. 

      31 years

    • D. 

      39 years

  • 24. 
    An adverse user can take title by his or her adverse use from
    • A. 

      A minor

    • B. 

      A foreign owner

    • C. 

      The government

    • D. 

      A person declared to be incompetent

  • 25. 
    A special warranty deed warrants that the grantor:
    • A. 

      Has not made any undisclosed transfer of title or encumbrance

    • B. 

      Will guarantee that there are no undisclosed liens

    • C. 

      Will make good any loss suffered by the grantee because of title defects

    • D. 

      Will provide any further instrument or act needed to perfect title

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