Unit 8

when an investor has to pay a lender more to finance the investment than the investment property generates in income, the investor suffers from

• negative amortization

• negative leverage

• a reverse mortgage

• a debt investment

cost recovery is allowed as a federal tax deduction on

• principal residences that do not have a home office

• income properties

• land

• commercial properties owned by the federal government

a homeowner paid $200k for a house 3 years ago. the house sells today for $239k. how much has the property appreciated?

• 8.4%

• 6.5%

• 19.5%

• 16.3%

the primary tax benefit in owning a non-income property such as a residence is

• depreciation of improvements

• appreciation of land

• a deduction for costs of operating the property

• a deduction for mortgage interest

a house sold for $250k. the seller paid a brokerage commission of 6%, legal fees of $600, and had other closing costs of $1500, what are the net proceeds from the sale?

• $235k

• $234k

• $233,500

• $232,900

a homeowner bought a house 5 years ago for $150k. Since then, the homeowner has spent $3k to pave the driveway and has added a central heating/airconditioning system at a cost of $4k. what is the homeowners adjusted basis if the house is sold today?

• $156k

• $157k

• $144k

• $145k

a homeowner sold her house and realized a net proceeds amount of $210k. her adjusted basis in the home was $176k. she immediately bought anouther house for $200k. what was her capital gain.

• $10k

• $24k

• $34k

• $0

after 5 years of owner-occupancy, simon wilson sells his principal residence for a gain of $150k, and the next month buys another principal residence that costs more than the adjusted sale price of the old home. which of the following is true of the treatment of the tax on gain?

• there is no taxable gain

• it must be paid in the year of the sale

• the homeowner may choose to pay it or defer it

• tax is due on the difference between the cost of the new home and the adjusted basis of the old one

ralph roberts buys a small office building as an investment and participates actively in the management and operation of the building. this is an example of

• syndication

• equity investment

• direct investment

• illiquidity

elmo gilmore owns a small retail property that he inherited from his father. there are no mortgages or interest expenses connected with the property. elmo takes an annual cost recovery expense of $5k. the property has a monthly gross income of $1500 and monthly operating expense of $500. elmo's taxable income from this property will be taxed at a rate of 30%. what is the tax liability for the year?

• $2100

• $3600

• $3900

• $7000