REE 3043 Exam 1 Questions and Answers All Correct
List the four classes of real property: - Answer-1. Real estate held as a personal residence
2. Real estate held for sale to others - dealer property
3. Real estate held for use in a trade or business - trade or business property
4. Real esta...
REE 3043 Exam 1 Questions and
Answers All Correct
List the four classes of real property: - Answer-1. Real estate held as a personal
residence
2. Real estate held for sale to others - dealer property
3. Real estate held for use in a trade or business - trade or business property
4. Real estate held as an investment for the production of income - investment property
A List the three types of income subject to federal taxation: - Answer-1.Active Income
2.Portfolio Income
3.Passive Income
For purposes of federal income tax, an apartment complex purchased and held by an
investor renting space to tenants is classified as: - Answer-C. Business Property
The dividends distributed to investors in a real estate investment trust are classified as:
- Answer-D. Portfolio income
Under current federal income tax law, for property obtained after 1994, the allowable
cost recovery period for owner-occupied single-family residential income property is: -
Answer-D. None of the above
The total tax paid by a taxpayer, divided by their taxable income is termed: - Answer-B.
the average tax rate
For individuals and partnerships, tax losses from passive activities can be used to offset
positive taxable income from ______. - Answer-A. other passive activities
If a real estate investor (sole owner) is an active participant, passive tax losses from the
investment may in some cases be used to offset: - Answer-D. all of the above
T/F Real property held for resale to others by contractors and brokers is classified by
the IRS as a 'business property'. - Answer-False
T/F Income earned from salaries, wages, and commissions is termed earned income -
Answer-False
T/F When evaluating whether to invest in a project, the investment analysis should
consider the investor's marginal rate, as opposed to the investor's average tax rate. -
Answer-True
, T/F The income and expenses associated with directly owning rental property, either in
the form of a sole proprietorship or a partnership, are included as 'income from rental
real estate, royalties, and partnerships' on the federal tax form. - Answer-True
T/F If the taxable income on a property is greater than the before tax ash flows, the
property has tax sheltering characteristics. - Answer-False
T/F Reserves that are set aside to be used in the future to replace capital item can be
deducted from the property's income for tax purposes - Answer-False
T/F For income property, up -front financing costs are not fully deductible in the year in
which they are paid. The costs must be amortized over the term of the loan - Answer-
True
T/F Raw land purchased by an investor looking to develop a residential subdivision in
the future can be depreciated. - Answer-False
Economists suggest that the value of something results from its utility and: - Answer-D.
Scarcity
A branch of economics that extends the basic ideas of the early classical and
neoclassical economists to better understand and predict how humans use space is
termed: - Answer-C. Urban economics
Formal arrangements and associations that members of society make to support
fundamental economic and social activities are referred to, in the text, as: - Answer-B.
institutions
Marshall contended that in a perfect market, the value of a good - Answer-A. was equal
to its price
Commercial mortgages held in the portfolios of lenders are generally referred to as: -
Answer-D. Unsecuritized commercial mortgages
Stocks, bonds, and cash are generally classified as: - Answer-B. Financial assets
Real estate in the United States represents approximately what portion of the world's
wealth? - Answer-A. 15 percent
Approximately _______ of the wealth of real estate in the U.S. accrues to residential
property. - Answer-D. 75%
According to the text, business real estate (excluding farmland) accounts for
approximately ____ percent of the total value of real estate in the U.S? - Answer-A.
15%
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