Introduction To Taxation Dat Hoang May 2, 2020 No Comments 1. 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 compactness of the area homeowner's exemptions HintThe others are more significant. 2. To be eligible for the universal exclusion, a couple must have: used it as a permanent residence for two years both a and b owned the property for five years neither a nor b HintOver a five-year period. Can be taken every two years. 3. 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 HintIt is treated as a sale cost, but buyer points are treated as interest. 4. 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? none $35,000 $160,000 $120,000 HintHe has a $250,000 exclusion. 5. 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 depreciation monthly gardening costs cost to build a swimming pool HintWould be added to cost basis and depreciated over life of pool. 6. The maximum gift a donor can give to each donee and be exempt from the federal gift tax is: zero $1,000 $10,000 $13,000 HintMay be changed. 7. You may gain a federal tax advantage by: depreciating income property trading like for like all of these taking proceeds of a sale over a number of years 8. A man traded his commercial property for vacant land. As to this trade, which is a true statement? all of the above if there was boot the boot would be taxable it qualifies as a 1031 exchange it would be considered like for like 9. The term "tax roll" refers to: total taxable assessed value maximum annual tax increase the property's adjusted cost basis current tax rate times assessed value HintOf county. 10. Boot in an exchange would be: all of these mortgage relief unline property received cash received 11. Boot refers to: commercial or income property evictions sale of a business exchanges HintUnlike property in trade. 12. Under the Street Improvement Act of 1911, how long does an owner have to pay the bill after receipt? 45 days 30 days 90 days 10 days HintOr it goes to bond. 13. A property owner's tax rate would be set by the: tax collector mayor county board of supervisors tax assessor HintThe assessor sets the value. 14. For income tax purposes, an income property owner cannot deduct: rental commission paid loss of income because of vacancy management fees depreciation HintIt is neither income nor deduction. 15. Which of the following is an ad valorem tax? real estate tax use tax both a and c sales tax HintTaxed according to value. (Sales tax is based on price). 16. 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 no loss or gain a $20,000 loss a tax shelter HintThere is no loss since the property is a residence. 17. The long term capital gains rate on the gain by a person in a 28 percent tax bracket is: 5 percent 25 percent 15 percent 28 percent 18. Street improvements are assessed based on: assessed value front footage ad valorem value none of these 19. 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 cost of the pool to his book value add the value of the pool to his depreciation for that year HintAnd depreciate it. 20. 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? $1,000 $5,000 $3,000 no limit 21. 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 a greater value, and pay 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 HintShe pays the boot. If she received boot, it would be taxable. 22. Regina's city puts in a sewer line in front of her lot. She can expect a: tax rate increase all of these general assessment special assessment 23. 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: $16.50 $12.65 $22.45 $19.80 Hint$.55 per $500 of the seller's equity. 24. A buyer does not have to withhold part of the purchase price from a foreign national seller when: the property is unimproved it is a personal residence with a $250,000 sale price none of the above the broker failed to explain the withholding requirement Hint$300,000 or less is exempt. 25. The federal income tax would be best described as a(n). ad valorem tax progressive tax graduated tax cumulative tax HintRates increase with income. 26. A purchaser at a tax foreclosure sale obtains a: warranty deed sheriff's deed state controller's deed tax deed HintA sheriff's deed is given at a creditor sale. 27. Which of the following transfer of a principal residence would result in the reassessment of a property? transfer between grandparents and a grandchild transfer between spouses transfer between registered domestic partners transfer between cousins HintOthers are exempt. 28. The term tax shelter is associated with: income tax sales tax personal property tax real estate tax HintTo shelter income from taxation. 29. A disadvantage of corporations in relation to taxes is: minimum tax rates double taxation because both corporate profit and dividends to stock holders are taxed neither a nor b both a and b HintExcept Chapter S corporations. 30. 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? none $30,000 $12,500 $25,000 HintHer adjusted gross income is over $150,000. 31. For tax purposes, Paul can depreciate: raw land held for appreciation his urban residence a mature fruit orchard his residence on his farm HintFruit trees can be depreciated. 32. The California sales tax is: a tax on real property both a and b a tax on personal property an ad valorem tax HintTaxed on price, not value. 33. The party responsible for reporting a sale to the IRS is the: seller buyer broker escrow 34. By use of a tax shelter, a taxpayer may: defer taxes increase his or her book value evade taxes decrease his or her net spendable income HintThe taxpayer pays when the gain is realized. 35. 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? $12,500 $100,000 $50,000 none HintUp to $25,000, but it is reduced $1 for every $2 in adjusted gross income over $100,000. 36. The following are not exempt from real property taxation: growing crops both b and c grapevines 3.5 years old fruit trees 3.5 years old HintGrapevines under three years old and fruit trees under four years old are exempt. 37. An advantage to a seller of an installment sale is: the two-year rule the payment of capital gains over the contract period tax avoidance the fact that boot is not taxable 38. A veteran must apply for tax exemption by: March 1 June 1 April 15 December 31 39. The period for redemption for unpaid taxes is: five years from the date of book sale five years from delinquency five years from the date assessed five years from the sheriff's sale HintThe date of sale sets the five-year redemption period. 40. Boot in an exchange would be: cash received unlike property received all of these mortgage relief 41. A seller had owned income property for 19 months. The tax on the capital gains upon sale would be: 25 percent 5 percent 28 percent 15 percent HintOver 12 months. 42. Under FIRPTA, how much must the buyer withhold from the sales price when the seller is a U.S. citizen? 3 1/3 percent 1 percent 10 percent nothing HintFIRPTA applies only to foreign nationals. 43. Which proposition allows a property to retain its tax base when it is transferred from parent to child? 42 90 60 58 44. 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: delinquency charge transfer charge supplemental tax bill revised statement of taxes HintIt will reflect the increased assessment for the balance of the year. 45. A tax collector is selling a tax-defaulted property at public auction; the sale: must be at least 25 percent of market value is to the highest bidder regardless of the bid must be at least 50 percent of market value must be at reasonable market value 46. A prudent person would be interested in income taxes: after purchasing after sale at the time the first income is received after purchasing when he or she first considers 47. The unadjusted basis of a taxpayer's residence would be: cost minus improvements cost plus improvements cost plus improvements minus depreciation cost 48. 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 90 Proposition 60 Proposition 58 HintProposition 90 applies to another county. 49. A tax on the gross receipts of a broker would be a: sales tax none of these business license tax use tax HintBased on volume. 50. A foreign seller sold his residence in California for $300,000. How much must the buyer withhold for California tax purposes? 3 1/3 percent of sale price 10 percent of sale nothing $150,000 HintExemption for seller's residence. 51. The capital gains rate for a person in the 10 percent tax bracket for a gain in 2012 would be: 5 percent 15 percent zero 10 percent HintThrough 2012. 52. The adjusted basis of a taxpayer's residence would be: cost plus improvements minus depreciation cost minus imrpovements cost plus improvements cost HintCannot depreciate your residence. 53. 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 nothing $100,000 $15,000 Hint$500,000 exclusion so 15% on $100,000. 54. The second installment of the real estate tax is due: April 10 March 1 December 10 February 1 HintBut is delinquent April 10. 55. 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: $40,000 $4,000 $150,000 more than $150,000 Hint$172,592