Introduction To Taxation 1. Boot in an exchange would be: mortgage relief all of these unline property received cash received None 2. A man traded his commercial property for vacant land. As to this trade, which is a true statement? it qualifies as a 1031 exchange all of the above it would be considered like for like if there was boot the boot would be taxable None 3. For a tax-free exchange on Sharon's rental units, she should exchange for: smaller apartment units and take cash to balance out the trade an apartment unit of the same value with a lower mortgage a residence for herself having the same value an apartment unit of a greater value, and pay cash to balance out the trade None Hint 4. Ralph builds a swimming pool at his apartment building in order to reduce his vacancy factor. For tax purposes, he may: deduct the cost of the pool as an expense in the year it was expended add the cost of the pool to his book value add the value of the pool to his depreciation for that year none of these None Hint 5. You may gain a federal tax advantage by: taking proceeds of a sale over a number of years all of these trading like for like depreciating income property None 6. The federal income tax would be best described as a(n). cumulative tax graduated tax ad valorem tax progressive tax None Hint 7. Boot in an exchange would be: mortgage relief cash received unlike property received all of these None 8. To be eligible for the universal exclusion, a couple must have: used it as a permanent residence for two years neither a nor b both a and b owned the property for five years None Hint 9. A buyer does not have to withhold part of the purchase price from a foreign national seller when: it is a personal residence with a $250,000 sale price the broker failed to explain the withholding requirement the property is unimproved none of the above None Hint 10. For tax purposes, Paul can depreciate: his urban residence raw land held for appreciation a mature fruit orchard his residence on his farm None Hint 11. An advantage to a seller of an installment sale is: the two-year rule tax avoidance the fact that boot is not taxable the payment of capital gains over the contract period None 12. The unadjusted basis of a taxpayer's residence would be: cost cost plus improvements minus depreciation cost minus improvements cost plus improvements None 13. Three years ago a taxpayer had a large capital loss but no gain to offset it. How much of the gain is she allowed to use each year to shelter other income? $5,000 $3,000 $1,000 no limit None 14. The period for redemption for unpaid taxes is: five years from the date of book sale five years from the date assessed five years from the sheriff's sale five years from delinquency None Hint 15. The term "tax roll" refers to: current tax rate times assessed value total taxable assessed value the property's adjusted cost basis maximum annual tax increase None Hint 16. Street improvements are assessed based on: front footage none of these assessed value ad valorem value None 17. The owner of an apartment building would have a number of tax deductions. Which of the following is not a deduction? interest paid on a mortgage monthly gardening costs cost to build a swimming pool depreciation None Hint 18. A veteran who is disabled due to military service and whose only income is his or her $18,000 pension has a property tax exemption of: more than $150,000 $150,000 $4,000 $40,000 None Hint 19. A married couple sold the home they had lived in for three years and realized a $600,000 profit. What would they pay in taxes? $125,000 $15,000 $100,000 nothing None Hint 20. Clyde, age 53, sells his residence for $160,000. He purchased it for $40,000 18 years earlier. Clyde does not intend to buy another house. What portion of the sale price is taxable? $120,000 $35,000 $160,000 none None Hint 21. Under FIRPTA, how much must the buyer withhold from the sales price when the seller is a U.S. citizen? nothing 1 percent 10 percent 3 1/3 percent None Hint 22. A tax collector is selling a tax-defaulted property at public auction; the sale: must be at reasonable market value must be at least 50 percent of market value is to the highest bidder regardless of the bid must be at least 25 percent of market value None 23. By use of a tax shelter, a taxpayer may: increase his or her book value evade taxes decrease his or her net spendable income defer taxes None Hint 24. A tax on the gross receipts of a broker would be a: use tax sales tax business license tax none of these None Hint 25. A prudent person would be interested in income taxes: after purchasing when he or she first considers at the time the first income is received after purchasing after sale None 26. The proposition that allows an elderly homeowner to transfer his or her cost baisis to another home in the same county is: Proposition 90 Proposition 13 Proposition 60 Proposition 58 None Hint 27. The California sales tax is: an ad valorem tax both a and b a tax on personal property a tax on real property None Hint 28. Which of the following transfer of a principal residence would result in the reassessment of a property? transfer between spouses transfer between cousins transfer between registered domestic partners transfer between grandparents and a grandchild None Hint 29. A veteran must apply for tax exemption by: June 1 December 31 March 1 April 15 None 30. Which of the following should have the least impact on property tax rates? large amounts of vacant land amount of commercial property in the area homeowner's exemptions compactness of the area None Hint 31. A buyer purchased a home on April 15. The taxes for the tax year had been paid, but the buyer received a tax bill anyway. This bill is known as a: transfer charge delinquency charge revised statement of taxes supplemental tax bill None Hint 32. Regina's city puts in a sewer line in front of her lot. She can expect a: all of these tax rate increase general assessment special assessment None 33. Gerald sells his residence for $200,000. He purchased it 12 months ago for $220,000. For tax purposes he has: a $20,000 loss no loss or gain a $20,000 capital gain a tax shelter None Hint 34. Harold sells a lot to Dick for $29,420. Dick assumes a first trust deed of $17,933. He gives Harold $1,000 cash and a second trust deed for the balance. The revenue stamps required are: $22.45 $12.65 $16.50 $19.80 None Hint 35. For income tax purposes, an income property owner cannot deduct: management fees rental commission paid depreciation loss of income because of vacancy None Hint 36. Which proposition allows a property to retain its tax base when it is transferred from parent to child? 90 42 58 60 None 37. Boot refers to: sale of a business commercial or income property exchanges evictions None Hint 38. A purchaser at a tax foreclosure sale obtains a: warranty deed sheriff's deed state controller's deed tax deed None Hint 39. The capital gains rate for a person in the 10 percent tax bracket for a gain in 2012 would be: 5 percent 10 percent zero 15 percent None Hint 40. A disadvantage of corporations in relation to taxes is: neither a nor b minimum tax rates double taxation because both corporate profit and dividends to stock holders are taxed both a and b None Hint 41. Under the Street Improvement Act of 1911, how long does an owner have to pay the bill after receipt? 10 days 45 days 90 days 30 days None Hint 42. The party responsible for reporting a sale to the IRS is the: broker escrow seller buyer None 43. The adjusted basis of a taxpayer's residence would be: cost cost minus imrpovements cost plus improvements minus depreciation cost plus improvements None Hint 44. A taxpayer, who has an adjusted gross income of $125,000, suffered a passive loss of $100,000. How much of his loss can be used to shelter active income? none $50,000 $100,000 $12,500 None Hint 45. A foreign seller sold his residence in California for $300,000. How much must the buyer withhold for California tax purposes? $150,000 10 percent of sale 3 1/3 percent of sale price nothing None Hint 46. A seller had owned income property for 19 months. The tax on the capital gains upon sale would be: 25 percent 15 percent 28 percent 5 percent None Hint 47. When a seller pays points, for tax purposes this would: be deductible as an interest expense be treated the same as a prepayment penalty not be deductible increase the cost basis None Hint 48. The second installment of the real estate tax is due: April 10 February 1 December 10 March 1 None Hint 49. The maximum gift a donor can give to each donee and be exempt from the federal gift tax is: $10,000 $13,000 zero $1,000 None Hint 50. A property owner's tax rate would be set by the: mayor county board of supervisors tax assessor tax collector None Hint 51. The term tax shelter is associated with: personal property tax sales tax real estate tax income tax None Hint 52. The following are not exempt from real property taxation: both b and c fruit trees 3.5 years old growing crops grapevines 3.5 years old None Hint 53. The long term capital gains rate on the gain by a person in a 28 percent tax bracket is: 25 percent 15 percent 28 percent 5 percent None 54. Which of the following is an ad valorem tax? sales tax real estate tax use tax both a and c None Hint 55. Josie takes a $30,000 loss on operations of her apartment building. In the same year, her total adjusted gross income is $152,000. How much of her other active income can be sheltered from taxes? $25,000 none $12,500 $30,000 None Hint
