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