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Real Estate Taxation

Description: This quiz covers the fundamentals of real estate taxation, including property taxes, capital gains taxes, and depreciation.
Number of Questions: 14
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Tags: real estate taxation property taxes capital gains taxes depreciation
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What is the primary source of revenue for local governments in the United States?

  1. Property taxes

  2. Income taxes

  3. Sales taxes

  4. Federal grants

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Correct Option: A
Explanation:

Property taxes are the primary source of revenue for local governments in the United States, accounting for approximately 25% of all local government revenue.

What is the basis for property taxes?

  1. The assessed value of the property

  2. The purchase price of the property

  3. The market value of the property

  4. The rental income from the property

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Correct Option: A
Explanation:

Property taxes are based on the assessed value of the property, which is typically determined by a local government appraiser.

What is the typical range of property tax rates in the United States?

  1. 0.5% to 1%

  2. 1% to 2%

  3. 2% to 3%

  4. 3% to 4%

Show answer
Correct Option: B
Explanation:

The typical range of property tax rates in the United States is 1% to 2% of the assessed value of the property.

What is the difference between a property tax and a special assessment?

  1. Property taxes are based on the value of the property, while special assessments are based on the benefits received from a specific improvement.

  2. Property taxes are paid to the local government, while special assessments are paid to a special district.

  3. Property taxes are deductible on federal income taxes, while special assessments are not.

  4. All of the above.

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Correct Option: D
Explanation:

Property taxes are based on the value of the property, while special assessments are based on the benefits received from a specific improvement. Property taxes are paid to the local government, while special assessments are paid to a special district. Property taxes are deductible on federal income taxes, while special assessments are not.

What is the capital gains tax rate on the sale of real estate?

  1. 0%

  2. 15%

  3. 20%

  4. 25%

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Correct Option: A
Explanation:

The capital gains tax rate on the sale of real estate is 0% for most taxpayers.

What is the depreciation period for residential rental property?

  1. 27.5 years

  2. 39 years

  3. 50 years

  4. 100 years

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Correct Option: A
Explanation:

The depreciation period for residential rental property is 27.5 years.

What is the depreciation period for commercial real estate?

  1. 27.5 years

  2. 39 years

  3. 50 years

  4. 100 years

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Correct Option: B
Explanation:

The depreciation period for commercial real estate is 39 years.

What is the difference between a cost approach and an income approach to real estate valuation?

  1. A cost approach estimates the value of a property based on the cost to replace it, while an income approach estimates the value of a property based on the income it generates.

  2. A cost approach estimates the value of a property based on the market value of similar properties, while an income approach estimates the value of a property based on the income it generates.

  3. A cost approach estimates the value of a property based on the cost to replace it, while an income approach estimates the value of a property based on the market value of similar properties.

  4. None of the above.

Show answer
Correct Option: A
Explanation:

A cost approach estimates the value of a property based on the cost to replace it, while an income approach estimates the value of a property based on the income it generates.

What is the highest and best use of a property?

  1. The use that generates the highest income

  2. The use that is most consistent with the surrounding area

  3. The use that is most environmentally friendly

  4. The use that is most aesthetically pleasing

Show answer
Correct Option: A
Explanation:

The highest and best use of a property is the use that generates the highest income.

What is the difference between a zoning ordinance and a subdivision regulation?

  1. A zoning ordinance regulates the use of land, while a subdivision regulation regulates the division of land.

  2. A zoning ordinance regulates the size and shape of buildings, while a subdivision regulation regulates the division of land.

  3. A zoning ordinance regulates the location of buildings, while a subdivision regulation regulates the division of land.

  4. None of the above.

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Correct Option: A
Explanation:

A zoning ordinance regulates the use of land, while a subdivision regulation regulates the division of land.

What is the purpose of a title insurance policy?

  1. To protect the lender against loss if the title to the property is defective.

  2. To protect the buyer against loss if the title to the property is defective.

  3. To protect both the lender and the buyer against loss if the title to the property is defective.

  4. None of the above.

Show answer
Correct Option: C
Explanation:

A title insurance policy protects both the lender and the buyer against loss if the title to the property is defective.

What is the difference between a mortgage and a deed of trust?

  1. A mortgage is a lien on the property, while a deed of trust is a transfer of the title to the property to a trustee.

  2. A mortgage is a loan secured by the property, while a deed of trust is a transfer of the title to the property to a trustee.

  3. A mortgage is a lien on the property, while a deed of trust is a loan secured by the property.

  4. None of the above.

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Correct Option: A
Explanation:

A mortgage is a lien on the property, while a deed of trust is a transfer of the title to the property to a trustee.

What is the purpose of a real estate closing?

  1. To transfer the title of the property from the seller to the buyer.

  2. To pay off the seller's mortgage.

  3. To record the deed with the county recorder.

  4. All of the above.

Show answer
Correct Option: D
Explanation:

A real estate closing is a meeting at which the title of the property is transferred from the seller to the buyer, the seller's mortgage is paid off, and the deed is recorded with the county recorder.

What is the difference between a real estate agent and a real estate broker?

  1. A real estate agent is licensed to sell real estate, while a real estate broker is licensed to both sell and manage real estate.

  2. A real estate agent is licensed to sell real estate, while a real estate broker is licensed to manage real estate.

  3. A real estate agent is licensed to sell real estate, while a real estate broker is licensed to both sell and lease real estate.

  4. None of the above.

Show answer
Correct Option: A
Explanation:

A real estate agent is licensed to sell real estate, while a real estate broker is licensed to both sell and manage real estate.

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