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IL CH15 Basic Real Estate Concepts Review Questions

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Which of the following is a tax-deductible expense resulting from home ownership?

A. operating expenses
B. depreciation
C. mortgage interest
D. energy use
C. mortgage interest
The $250,000/$500,000 exemption for capital gains applies only to:

A. residential single-family properties
B. apartment buildings
C. principal residences
D. vacation properties
C. principal residences
A real estate commission paid by a seller:

A. may be deducted from the selling price as a selling expense in calculating the amount realized in the sale of a principal residence
B. is deductible from ordinary income (wage income) by the s
A. may be deducted from the selling price as a selling expense in calculating the amount realized in the sale of a principal residence
A mortgage prepayment penalty paid by a borrower as a requirement for early loan payoff:

A. may be deducted as interest in the year paid
B. may be deducted as interest over a five-year period
C. may only be deducted from selling pric
A. may be deducted as interest in the year paid
To qualify for the $250,000 capital gains exclusion:

A. one of the taxpayers must be over 55 years old
B. the taxpayers must purchase a new home of equal or greater value within the next 24 months
C. the taxpayers must use the rollov
D. The property must have been the tax payer's principal residence for two of the previous five years
Which of the following married couples filing a joint return will NOT qualify for the $500,000 capital gains exemption?

A. a couple lived and owned the property for the past seven years
B. recently married, one spouse lived in and owned t
D. a couple lived in the home for one years. One spouse owned and occupied the property for five years before they were married. The other spouse moved in one year ago.
Which of the following is a benefit depreciation provides?

A. tax credit
B. tax deduction
C. tax evasion
D. tax deferment
B. tax deduction
Deductible expenses for a business property include all of the following EXCEPT:

A. advertising
B. utilities
C. mortgage principal
D. insurance
C. mortgage principal
Raul Ramirez and Sarah Gildar trade office buildings. In the trade, Raul receives $20,000 in cash in addition to Sarah's office building. With regard to this transaction, which of the following is correct?

A. the transaction does not qualify a
B. the cash Raul receives is called boot and is taxable for the year in which the exchange occurs
The basis of property received in a tax-free exchange is:

A. the basis as it was to the prior owner at the time of the exchange
B. the average of the difference in the basis of all properties exchanged
C. the same basis as the basis
C. the same basis as the basis of the properties exchanged
In 1993, Ed and Margaret take advantage of the low interest rates to refinance their existing 30-year, 13.5 percent mortgage with a 15-year, 9.5 percent mortgage on their present home. They pay $1,500 in discount points to refinance this loan. How will t
C. they may deduct only $100 per year
The maximun capital gains tax rate is:

A. 10 percent
B. 20 percent
C. 28 percent
D. 39.5 percent
B. 20 percent
Victor and Valerie own a vacation property at the beach, which they use only one week per year. The property is rented out at fair market value the rest of the year. Which items of this property can they deduct?

A. motgage principal only
C. mortgage interest, repairs, depreciation, maintenance, and property taxes
Charles and Maria own two properties. One is their principal residence, and the other is a vacation cottage they use three weeks of the year and rent out the rest. What items can they deduct for the cottage?

A. mortgage interest and property t
A. mortgage interest and property taxes
John sell his home. On the sale, John makes a profit of $375,000. How will John be taxed?

A. if John has lived in the property for at least two years, he will not have to pay taxes on the profit
B. if John has lived in the property for at
B. if John has lived in the property for at least two years, he will only be taxed on $125,000 of the profit
If someone makes a profit on the sale of real estate, the profit is called:

A. a real gain
B. a capital gain
C. disintermediation
D. a miracle
B. a capital gain
Which of the following statements is INCORRECT regading the capital gain exemption for owner-occupied properties?

A. the exemption amount is $250,000 for single taxpayers
B. the exemption is $500,000 for married cuoples filing jointly
C. the taxpayer must have occupied the property for one of the three years preceding the sale

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