Exam (elaborations)
REE 3043 - Woodyard FSU - Exam 2 (1).
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REE 3043 - Woodyard FSU - Exam 2 (1).
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REE 3043 - Woodyard FSU - Exam 2Active income - ANS-income earned from salary wages, commissions, fees, and bonuses
After-tax cash flows - ANS-the residual claim on the property's cash flows after the federal
government has collected its share
Capital asset - ANS-an asset held for investment purposes
Cost recovery period - ANS-the period of time over which an asset is depreciated for tax
purposes
Dealer property - ANS-real estate held for sale to others
Deep tax shelter - ANS-negative taxable income from operations
Deferral benefits - ANS-the gain from delaying the payment of taxes until the property is sold
Depreciable basis - ANS-generally, the value of the acquired property (aka original cost basis)
less the value of the land
Investment activity - ANS-actions taken to maximize the production of future income
Investment property - ANS-real estate held as an investment for an investment for the
production of income
Original cost basis - ANS-total costs paid to acquire the property including land, building, and
acquisition expenses
Partial tax shelter - ANS-taxable income from operations less than before-tax cash flow
Passive income - ANS-income generated from trade and business activities in which the
taxpayer does not "materially" participate or generated from certain rental activities such as
rental real estate
Personal property - ANS-items such as furniture and fixtures which are often purchased in
conjunction with real property acquisitions
Personal residence - ANS-an owner-occupied housing unit
Portfolio income - ANS-income from investments in securities
, Replacement reserves - ANS-money set aside each year to accumulate a fund for the eventual
replacement of personal property
Standard deduction - ANS-the amount of deductible expenses, specified by Congress, that a
taxpayer may claim in lieu of itemizing allowable personal expenditures
Substantial improvements - ANS-major alterations to a property made in the years after
purchase, these improvements are treated as a separate building for tax purposes
Tax depreciation - ANS-the reduction in taxable income intended to reflect the wear and tear
that income properties experience over time
Trade or business property - ANS-real estate held for use in a trade or business, includes most
income producing property
C corporation - ANS-corporate ownership structure which provides limited liability, but suffers
from double taxation and does not enable losses to flow through to investors for current use
Commingled real estate funds - ANS-a collection of resources from various pension funds which
are pooled to purchase properties
Equity REITs - ANS-real estate investment trusts which invest in and operate income producing
properties
Funds from operations - ANS-net (accounting) income, plus tax depreciation, plus amortization
of leasing commissions and tenant improvements
General partnership - ANS-an ownership from characterized by multiple owners, unlimited
liability for each equity holder, and flow through taxation of both income and losses
Hybrid REITs - ANS-real estate investment trusts which invest in both properties and mortgages
Joint ventures - ANS-a business partnership formed between a lender and a developer or
investor to develop or purchase a specific property or properties
Limited liability company - ANS-a hybrid form of ownership that combines the corporate
characteristics of limited liability with the tax characteristics of a partnership
Limited partnership - ANS-a partnership in which one party assumes unlimited liability in
exchange for control of all material decision making, while all parties benefit from flow through
income and taxation
Mortgage REITs - ANS-real estate investment trusts which purchase mortgage obligations and
effectively become real estate lenders
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