Which phase of the investment cycle is best known for write-offs and, depending on the project, tax credits?
Acquisition
Ownership
Reversion
Sale
After owning a tattoo parlor for 12 years, Gilbert sold it. Gilbert’s accountant calculated a $46,000 capital gain. Which one of the following statements is true?
Gilbert will pay tax at the ordinary tax rate on this capital gain.
Gilbert will pay tax on the gain at the long-term capital gains rate.
The long-term capital gains tax rate is more than the tax rate on ordinary income.
This is considered a short-term capital gain.
What type of income is received through activities not directly related to active participation in a business or earnings from wages, such as rental income?
Active
Passive
Portfolio
Stock
What can be depreciated by an investor?
Expenses
Land
Tools and equipment
Water
Why do investors have a special interest in the impact income taxes have?
In 2013, a 6.8% tax on investment income was added.
Income tax is a significant factor in return on investment.
Investors want to minimize the deductions.
Most investors avoid paying taxes.
Which one of the following is income that comes from investments, which includes capital gains, interest, and dividends?
Active
Passive
Portfolio
Stock
Curtis wants to do a 1031 exchange. He just closed on his property. How many days does he have to identify a new property?
180
30
45
60
A homeowner is selling their bungalow via installment contract, and the buyer has made payments for five years but has not made payments in the last year. Which of the following is true?
The buyer can sell the property for a profit.
The seller can keep all of the proceeds received and repossess the property.
The seller must petition the court to receive title to the property.
The seller must return the proceeds received, but she can repossess the property.
An investor can defer taxes on which of the following line items through Section 1031 of the Internal Revenue Code?
Capital gains tax and recaptured depreciation
Income tax and capital gains
Income tax and property tax
Recaptured depreciation and property taxes
An investor wants to do a 1031 exchange. They sold the investment property and has identified the property they’d like to buy next. Within how many days must they close on this property in order for it to qualify as part of the exchange?
180
30
45
60
Julius sold one of his investment properties and used the proceeds of the sale to invest in some equipment for one of his other businesses. Can he defer the capital gains taxes on the sale of the investment property?
No, because capital gains are always due in the same tax year as the sale.
No, because the purchase was not a like-kind property.
Yes, because he reinvested the money.
Yes, because his accountant applied for a waiver.
What would an investor get after subtracting the adjusted basis from an investment property’s sales price?
Appreciation of depreciation
Capital gain or capital loss
Depreciation
Operating expenses
What is another name for an installment sale contract?
A land contract
An equitable lien
A pro-rated sales plan
A traditional mortgage
After operating the firm for 17 years, Trethlon Manufacturing just sold its entire operation for $5.7 million. The adjusted purchase price was $3.9 million. While the corporation ran the business, it spent $970,000 on capital improvements. Real estate commissions and other costs of the sale were $358,000. What is Trethlon’s capital gain?
$1.328 million
$1.8 million
$472,000
$5.7 million
What does an investor get when you add the purchase price to closing expenses and the cost of any improvements during the time of ownership, then subtract any depreciation taken?
Adjusted basis
Basis
Capital gain
ROI
Which one of the following could apply to closing costs for an investment property?
Amortized over 17 years
Amortized over the life of the loan
Never deductible in the year they’re paid
Subtracted from the cost basis
Which of the following is earned income (i.e., income earned directly through the taxpayers’ efforts)?
Active
Passive
Portfolio
Stock
Which stage of the investment cycle is an investor in when there is depreciated basis and tax-deferral through 1031 exchanges?
Acquisition
Depreciation
Ownership
Reversion
Which of the following is a reason a seller might consider selling his property through an installment contract rather than a traditional sale?
The buyer in an installment transaction is likely to have better credit than a buyer in a traditional sale.
The seller is not subject to fair housing requirements if he sells the property through an installment sale.
The seller may pay less in capital gains taxes if he receives the proceeds from the sale over time rather than in a lump sum.
The seller owes no property taxes as long as the property is under an installment sale contract.
If an investor realized a gain of $140,000 on the sale of an investment property and the depreciated amount was $20,000, what would happen?
Investor will pay 15% on the $20,000 and either 20% or 25% on the other $120,000.
Investor will pay 25% on the $20,000 and 15% on the other $120,000.
Investor will pay 25% on the $20,000 and 20% on the other $120,000.
Investor will pay 25% on the $20,000 and either 15% or 20% on the other $120,000.
Which one of the following statements about income tax rates is correct?
Short-term and long-term capital gains are taxed at the same rate.
The tax rate for ordinary income is different from the tax rate for short-term capital gains.
The tax rate on long-term capital gains is less than the tax rate for ordinary income.
The tax rate on short-term capital gains is less than the rate for long-term capital gains but more than the rate for ordinary income.
Which of the following benefits does a 1031 exchange provide to investors?
Avoiding taxes permanently
Increased funds to purchase a higher-value property
Increased property value
Recapturing 100% of the depreciated value
A property owner is selling the family farm via an installment contract. What is one advantage of selling the farm this way?
The buyer in an installment transaction is likely to have better credit than a buyer in a traditional sale.
The owner is not subject to fair housing requirements if they sell the property through an installment sale.
The owner will owe no property taxes as long as the property is under an installment sales contract.
The owner will pay less in capital gains taxes by receiving the proceeds from the sale over time, rather than in a lump sum.
Which phase of the investment cycle includes deductions for mortgage interest and property taxes?
Acquisition
Ownership
Reversion
Sale
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Under what type of police power is a property owner compensated for the loss of property?
Eminent domain
Escheat
Riparian
Taxation
A planning commission has final authority over which of these options?
Community goals
Comprehensive plan
Site plan
Zoning ordinances
What is a comprehensive plan?
A blueprint for new construction projects
A detailed plan that supplements a master plan and its implementation
A long-term master plan for the development of a city or county
A map of all of the zones in a district
In the movies, a shady salesperson might say “I have some great farmland to sell you in the Midwest; just take a look at this brochure and let me know if you’d like to buy!” The federal government passed a law to prevent such fraudulent sales of property sight unseen. What is that law?
Interstate Citizens Protection Act
Interstate Land Sales Full Disclosure Act
Police Power Act
Subdivision Act of 1997
At which level are police power and public land use controls enforced?
Government agencies may exercise police power only when it does not restrict the freedom of its citizens.
Local governments and their planning boards control budgeting, site-plan review, and building codes.
Planning, zoning, and subdivision development are primarily controlled at the state level.
Police power is citizens’ rights to police themselves.
Who or what entity determines the final results of the comprehensive plan?
The commission and local legislative body, with input from the public
The governor
The planning commission
The public
When the planning board gets together, Carl focuses on commercial aspects, Renee focuses on residential areas, and Arthur focuses on agricultural spaces—all without any insight from one another. What type of planning is this?
Form-based planning
Integrated planning
Pocket planning
Traditional planning
The government’s authority at all levels to ensure the health, safety, and welfare of its citizens, which includes the control of public land use, is the definition of ______.
Condemnation
Eminent domain
Police power
Sovereignty
Which of the following is studied when creating a comprehensive plan?
Arbitration
Area economic base
Condemnation
Mediation
Builders weren’t allowed to develop new properties in Cityville for six months. This is likely because the city had enacted a ______.
Condemnation
Moratorium
New tax base
Zoning ordinance
Can police power ever be used in a way that restricts citizens’ freedom?
No, that’s beyond the scope of police power.
Yes, but only when the citizen has committed a crime.
Yes, if it’s for the public good.
Yes, that’s the purpose of police power.
Who collects and gathers information for background studies used in a comprehensive plan?
Administrative law judges
City council members
Planning commissioners
Planning commission support staff
Which statement best describes traditional planning?
Developers identify how land will be used.
Residents determine how land will be used.
Specialists with different areas of expertise work separately and focus on designing “their” areas.
Specialists with different areas of expertise work together, focusing on overall use.
What’s the next step in the adoption process for a comprehensive plan once the background studies have been performed?
Developers bid on areas they would like to develop.
Residents vote on the plan.
The plan is reviewed at a public hearing by the local legislative body.
The plan is reviewed at a public hearing by the planning commission.
Adams County implemented a curfew for youths because of late-night crime in public places. Which of the following gives Adams County the right to restrict the movements of its minor citizens?
Doctrine of laches
Municipal master plan
Police power
Power of escheat
Which agency administers the Interstate Land Sales Full Disclosure Act?
Consumer Financial Protection Bureau
Department of Energy Conservation
Developers Land Sales Act
Housing and Urban Development
When it came time to plan the city, Arlene (the agriculture specialist), Robert (the residential guru), and Carmen (the commercial genius) all locked themselves in a room and planned the area together. What type of planning is this?
Form-based planning
Integrated planning
Pocket planning
Traditional planning
At what level of government are budgeting, site plan review, and building codes controlled?
Federal
Federal and state
Local
State