Income Taxation And Transfer Of Title
Chapter 3 Income Taxation and Transfer of Title
- 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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