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