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