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Real Estate > Property ownership and Interest > Flashcards

Property ownership and Interest Flashcards

1
Q

What is the difference between a freehold estate and a leasehold estate?

A

A freehold estate is an estate that lasts for an indeterminate length of time, while a leasehold estate is an estate that lasts for a fixed period of time

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2
Q

What is an encumbrance?

A

A claim or liability attached to real estate. Classified as liens and physical encumbrances.

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3
Q

What are the government powers?

A

Police power, Eminent domain, Taxation, and Escheatment

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4
Q

What is a fee simple absolute estate?

A

Absolute ownership; the holder is entitled to all rights to the property

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5
Q

What is a fee simple defeasable estate?

A

It is subject to the occurrence or nonoccurence of some specified event.

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6
Q

What is a fee simple determinable estate

A

An estate that can be inherited but only by special limitation

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7
Q

What are the four basic forms of co-ownership?

A

Tenancy in common, Joint Tenancy, tenancy by the entirety, and community property

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8
Q

What is Tenancy in common

A

Each owner holds an undivided interest in the property and can convey their individual interest in the property without agreement of the other owners

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9
Q

What is Joint Tenancy

A

Each owner holds an interest in unity with the other owner, so the property can only be conveyed as a unit with agreement of all owners

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10
Q

What is tenancy by the Entirety?

A

Creates a single unit of ownership and provides some legal protection from a lien being placed on the property due to a lawsuit against only one of the owners

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11
Q

What is the difference between a condominium and a cooperative?

A

A condo is a structure that has two or more units that are available for individual ownership but the connecting areas are owned by all unit owners with individual interest. A cooperative allows for a corporation to hold title in real estate and then offer shares of the corporation to purchasers

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12
Q

What business entities are allowed to own real estate?

A

Partnerships, Corporations, Limited Liability Companies, Syndicates/joint ventures, and real estate investment trusts

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13
Q

Which of these is NOT a cost or expense of owning a home (PITI)?

  • Taxes on personal property
  • Interest paid on borrowed capital
  • Homeowners insurance
  • Maintenance and repairs
A

Taxes on personal property

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14
Q

Homeowners may deduct which of the following expenses when preparing their income tax return?

  • Interest paid on maintenance and repairs
  • Real estate taxes
  • Insurance premiums
  • Flood insurance premiums
A

Real Estate Taxes

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15
Q

A couple paid $56,000 for their property 20 years ago. Today, the market value is $119,000, and the owe $5,000 on their mortgage. Regarding this situation, which of these is TRUE?

  • The $114,000 difference between the market value and the amount owed on the mortgage is their equity.
  • The $63,000 difference between the original investment and the market value is their tax basis
  • The $63,000 difference between the original investment and the market value will be used to compute the capital gains
  • The $114,000 difference between the market value and the mortgage is their replacement cost
A

The $63,000 difference between the original investment and the market value is their tax basis

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16
Q

A building that is remodeled into residential units and is no longer used for the purpose for which it was originally built is an example of

  • urban homesteading
  • Planned unit development
  • A converted use property
  • A modular home
A

A converted use property

17
Q

A highrise development that includes office space, stores, theaters, and apartment units is an example of:

  • A mixed use development (MUD)
  • A planned unit development (PUD)
  • A converted use property
  • special cluster zoning
A

A mixed use development (MUD)

18
Q

Each room of a house was pre-assembled at a factory, driven to the building site on a truck, and then lowered onto it’s foundation by a crane. Later, workers finished the structure and connected plumbing and wiring before the owners moved in. Which term BEST describes this type of home?

  • Modular
  • Mobile
  • Manufactured
  • converted
A

Modular

19
Q

A single woman bought a home 18 months ago and is now selling because she found a new job in another city. A married couple filing joint taxes has owned a nine-bedroom home for three years, Now, the couple wants to move to a small condominium unit. A single man owned his home for 17 years, sold it, and will use the proceeds from the sale to purchase a larger house. Based on these facts, which of these people is entitled to the $500,000 capital gains exclusion?

  • The married couple
  • The single woman
  • The married couple and the single mom
  • The single woman and the single man
A

The married couple

20
Q

When married homeowners who file jointly realize a profit from the sale of their home that exceeds $500,000, which of these is TRUE?

  • the profit exceeding $500,000 will be taxed at the current applicable capital gains rate
  • The homeowners will not pay capital gains tax if they are over 55
  • Up to $125,000 of the excess profit will be taxed as a capital gain
  • The excess gain will be taxed at the homeowners income tax rate
A

the profit exceeding $500,000 will be taxed at the current applicable capital gains rate

21
Q

Theft, smoke damage, an damage from fire are covered under which type of homeowners insurance policy?

  • Broad form
  • Coinsurance
  • National Flood Insurance Program policies
  • Basic form
A

Basic form (page 27)

22
Q

One result of the capital gains tax law is that MOST homeowners

  • Will pay capital gains tax at an 8% lower rate on their home sales
  • May build more equity in their primary residence
  • May use the $250,000 or $500,000 capital gains exclusion if they lived in the property for two out of the last five years.
  • will be permitted to use the $125,000 over-55 exclusion more than once
A

May use the $250,000 or $500,000 capital gains exclusion if they lived in the property for two out of the last five years.

23
Q

In determing whether a prospective buyer can afford a certain home purchase, lenders will consider

  • Ethnicity of the buyer
  • All of these
  • Address of the home
  • Credit score
A

credit score

24
Q

Tom, an art history professor from Dubuque, spends a year in Italy, after which he decides to sell his home to live in Rome. If Tome is single, he can expect to claim

  • a one-time exemption of $250,000
  • a 1031 exchange
  • the $250,000 capital gains exception
  • the $500,000 capital gains exception
A

the $250,000 capital gains exception

25
Q

An unmarried homewoners has $80,000 in equity in his primary residence of three years. The owner sells the residence for $135,000 The broker’s commission was 5.5% and the other selling expenses amounted to $1200. What is the owner’s taxable gain on this transaction?

  • $0
  • $46,375
  • $47,575
  • $61,425
A

$0

26
Q

A man incurs the following expenses: $9,500 in interest on a mortgage loan on his residence, $800 in real estate taxes plus a $450 late payment penalty, and a $1,000 loan origination fee paid in the course of purchasing his home. How much may be deducted from his gross income?

  • $9,800
  • $10,500
  • $11,750
  • $11,300
A

$11,300

27
Q

A community that merges housing, recreation, and commercial units into one self-contained development is called a

  • mixed use development (MUD)
  • Cooperative
  • Planned unit development (PUD)
  • Condominium
A

Planned unit development (PUD)

28
Q

Examples of policy efforts to increase home ownership include:

  • Lower closing costs for first time homebuyers
  • Requiring higher down payments
  • Requiring higher credit scores
  • Penalizing first time home buyers for using funds from IRAs
A

Lower closing costs for first time homebuyers

29
Q

Which of the following would NOT be like-kind property in a 1031 exchange of a rental single family home?

  • A condo purchased as income property
  • Vacant land
  • Three unit rental building
  • Single family home to be used as principal residence
A

Three unit rental building

30
Q

Which of these is NOT covered in either a basic form or a broad form homeowners insurance policy?

  • fire and lightning
  • Explosion
  • Flood
  • Windstorm and hail
A

Flood

31
Q

Which clause is found in MOST homeowners insurance policies?

  • Property improvement clause
  • Coinsurance clause
  • Co-ownership clause
  • Property devaluation clause
A

Coinsurance clause (pg 27)

32
Q

The portion of an owners’ property value that exceeds the amount of their mortgage debt is called

A

Equity

Real Estate (10 decks)

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