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Questions and Answers
A property is purchased for $200,000 and sold for $250,000. Which of the following describes the financial outcome?
A property is purchased for $200,000 and sold for $250,000. Which of the following describes the financial outcome?
- Adjusted basis
- Cash flow
- Capital loss
- Capital gain (correct)
Which depreciation method assumes an asset loses an equal amount of value each year?
Which depreciation method assumes an asset loses an equal amount of value each year?
- Tax depreciation
- Recaptured depreciation
- Accelerated depreciation
- Straight-line depreciation (correct)
Which of the following best describes 'boot' in a tax-deferred exchange?
Which of the following best describes 'boot' in a tax-deferred exchange?
- The profit realized from the sale.
- The original cost of the property.
- Cash received in the exchange. (correct)
- The tax rate applied to the exchange.
What is the primary purpose of tax depreciation?
What is the primary purpose of tax depreciation?
Which of these reduces a property's original cost to determine its adjusted basis?
Which of these reduces a property's original cost to determine its adjusted basis?
Under what condition might recaptured depreciation occur?
Under what condition might recaptured depreciation occur?
Which of the following is the most accurate description of adjusted basis?
Which of the following is the most accurate description of adjusted basis?
What is the primary benefit of a tax-deferred exchange under Section 1031?
What is the primary benefit of a tax-deferred exchange under Section 1031?
Which term describes the gain resulting from an increase in the market value of an investment, excluding capital additions?
Which term describes the gain resulting from an increase in the market value of an investment, excluding capital additions?
What does 'cash flow' represent in the context of investment property?
What does 'cash flow' represent in the context of investment property?
An investor owns a rental property but does not actively participate in its management. What type of income is generated from this property?
An investor owns a rental property but does not actively participate in its management. What type of income is generated from this property?
Which describes a method used to reduce taxable income, leading to lower tax payments?
Which describes a method used to reduce taxable income, leading to lower tax payments?
Which type of work will a mortgage banker perform?
Which type of work will a mortgage banker perform?
Which statement accurately describes the role of a mortgage broker?
Which statement accurately describes the role of a mortgage broker?
A lender evaluates a potential borrower to determine if they qualify for a loan. This process is known as:
A lender evaluates a potential borrower to determine if they qualify for a loan. This process is known as:
A loan officer makes a tentative assessment of how much a lending institution is willing to lend. This is known as which of the following?
A loan officer makes a tentative assessment of how much a lending institution is willing to lend. This is known as which of the following?
What is the purpose of a Pre-application and Fee Agreement?
What is the purpose of a Pre-application and Fee Agreement?
When is a Mortgage Broker Dual Agency Disclosure Form required?
When is a Mortgage Broker Dual Agency Disclosure Form required?
A written notice from a bank confirming it will provide mortgage funds for a house purchase is known as what?
A written notice from a bank confirming it will provide mortgage funds for a house purchase is known as what?
What is a Lender Rebate in the mortgage industry?
What is a Lender Rebate in the mortgage industry?
What is a Non-conforming Loan?
What is a Non-conforming Loan?
What is the purpose of a rate lock?
What is the purpose of a rate lock?
Which process involves a lender assessing a potential borrower's creditworthiness to determine if they should receive a loan?
Which process involves a lender assessing a potential borrower's creditworthiness to determine if they should receive a loan?
Which income type is generated when an individual actively performs services?
Which income type is generated when an individual actively performs services?
An asset is purchased for $150,000 and loses $3,000 in value each year. What principle does this demonstrate?
An asset is purchased for $150,000 and loses $3,000 in value each year. What principle does this demonstrate?
An investor sells real property and claims accelerated depreciation. Which of these might the investor be required to do when selling?
An investor sells real property and claims accelerated depreciation. Which of these might the investor be required to do when selling?
Which professional is an intermediary, bringing mortgage borrowers and mortgage lenders together without using their own funds to originate the mortgages?
Which professional is an intermediary, bringing mortgage borrowers and mortgage lenders together without using their own funds to originate the mortgages?
Prior to applying for a mortgage, a homebuyer receives disclosures. Which document does the homebuyer receive?
Prior to applying for a mortgage, a homebuyer receives disclosures. Which document does the homebuyer receive?
A potential borrower wants to lock in the interest rate on a mortgage. Which agreement is needed?
A potential borrower wants to lock in the interest rate on a mortgage. Which agreement is needed?
Which of these loan types fails to meet bank criteria for funding?
Which of these loan types fails to meet bank criteria for funding?
A property's original cost is $300,000. Over time, $50,000 in depreciation is claimed. Additionally, $20,000 in capital improvements are made. What is the adjusted basis?
A property's original cost is $300,000. Over time, $50,000 in depreciation is claimed. Additionally, $20,000 in capital improvements are made. What is the adjusted basis?
A property is sold for less than its purchase price. Which financial outcome describes this situation?
A property is sold for less than its purchase price. Which financial outcome describes this situation?
Under which section of the US Internal Revenue Code can a tax-deferred exchange be conducted?
Under which section of the US Internal Revenue Code can a tax-deferred exchange be conducted?
A real estate broker is acting as a mortgage broker in the same transaction. Which form is required?
A real estate broker is acting as a mortgage broker in the same transaction. Which form is required?
How does a pre-approval differ from a pre-qualification?
How does a pre-approval differ from a pre-qualification?
Which is a major accounting method that recognizes revenues and expenses at the time physical cash is actually received or paid out?
Which is a major accounting method that recognizes revenues and expenses at the time physical cash is actually received or paid out?
Which professional gathers paperwork from a borrower and passes that paperwork along to a mortgage lender for underwriting and approval?
Which professional gathers paperwork from a borrower and passes that paperwork along to a mortgage lender for underwriting and approval?
Which professional uses their own funds, or funds borrowed from a warehouse lender, to fund mortgages?
Which professional uses their own funds, or funds borrowed from a warehouse lender, to fund mortgages?
Depreciation is a concept used in accounting and taxation to account for the reduction in value of an asset over time. Which of the following scenarios exemplifies the application of tax depreciation?
Depreciation is a concept used in accounting and taxation to account for the reduction in value of an asset over time. Which of the following scenarios exemplifies the application of tax depreciation?
A property owner decides to exchange their property for another of equal value to defer capital gains. However, they also receive $50,000 in cash as part of the transaction. What best describes the tax implications regarding the cash received?
A property owner decides to exchange their property for another of equal value to defer capital gains. However, they also receive $50,000 in cash as part of the transaction. What best describes the tax implications regarding the cash received?
A real estate investor earns income from a rental property, but does not actively manage the property, instead hiring a property manager. Which of the following best describes this scenario?
A real estate investor earns income from a rental property, but does not actively manage the property, instead hiring a property manager. Which of the following best describes this scenario?
A homeowner is looking to obtain a mortgage. Which scenario best describes the difference between a mortgage banker and a mortgage broker?
A homeowner is looking to obtain a mortgage. Which scenario best describes the difference between a mortgage banker and a mortgage broker?
A potential homebuyer wants to get an idea of how much they might be able to borrow, but has not provided extensive documentation to a lender yet. Which would be most applicable?
A potential homebuyer wants to get an idea of how much they might be able to borrow, but has not provided extensive documentation to a lender yet. Which would be most applicable?
A borrower and a lender agree to fix an interest rate on a mortgage for 60 days. By what name is this most commonly known?
A borrower and a lender agree to fix an interest rate on a mortgage for 60 days. By what name is this most commonly known?
Flashcards
Straight-line Depreciation
Straight-line Depreciation
A method of calculating depreciation assuming an asset loses an equal amount of value each year.
Tax Depreciation
Tax Depreciation
An income deduction that allows a taxpayer to recover the cost of certain property through annual allowances for wear and tear.
Capital Gain
Capital Gain
A profit from selling property where the sale amount exceeds the purchase price.
Capital Loss
Capital Loss
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Cash Basis Accounting
Cash Basis Accounting
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Recaptured Depreciation
Recaptured Depreciation
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Adjusted Basis
Adjusted Basis
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Boot
Boot
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Tax-Deferred Exchange
Tax-Deferred Exchange
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Appreciation
Appreciation
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Cash Flow
Cash Flow
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Passive Activity Income
Passive Activity Income
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Active Income
Active Income
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Tax Shelter
Tax Shelter
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Mortgage Banker
Mortgage Banker
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Mortgage Broker
Mortgage Broker
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Pre-approval
Pre-approval
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Pre-qualification
Pre-qualification
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Pre-application and Fee Agreement
Pre-application and Fee Agreement
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Mortgage Broker Dual Agency Disclosure Form
Mortgage Broker Dual Agency Disclosure Form
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Mortgage Commitment
Mortgage Commitment
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Non-conforming Loan
Non-conforming Loan
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Lender Rebate
Lender Rebate
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Rate Lock
Rate Lock
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Underwriting
Underwriting
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Study Notes
Financial and Tax Terms
- Straight-line depreciation calculates an asset's depreciation by assuming it loses an equal amount of value each year.
- Tax depreciation is an income deduction allowing a taxpayer to recover the cost or basis of certain property, accounting for wear, tear, deterioration, or obsolescence.
- A capital gain is a profit from the sale of property where the amount realized exceeds the purchase price.
- A capital loss occurs when the selling price is lower than the purchase price, resulting in a financial loss.
- Basis is a major accounting method that recognizes revenues and expenses at the time physical cash is actually received or paid
- Recaptured depreciation occurs when real property is sold at a gain and accelerated depreciation has been claimed, potentially requiring the owner to pay tax at ordinary rates on the excess accelerated depreciation.
- Adjusted basis is the original property cost, less depreciation and sales of portions, plus allowable additions like capital improvements and certain carrying costs.
- Boot refers to cash received in a tax-deferred exchange.
- A tax-deferred exchange, under Section 1031 of the U.S. Internal Revenue Code, allows for deferral of capital gains or losses upon the exchange of certain properties.
- Appreciation represents monetary gain from an increase in an investment's market value, excluding capital additions.
- Cash flow is the net result of subtracting expenses from income on an investment property, which helps determine an investor's rate of return.
- Passive activity income includes earnings from a rental property in which an individual is not actively involved.
- Active income is income earned for performed services.
- A tax shelter reduces taxable income, lowering payments to tax collecting entities.
Mortgage Industry Terms
- Mortgage bankers originate mortgages using their own funds or funds borrowed from a warehouse lender.
- Mortgage brokers connect mortgage borrowers and lenders but do not use their own funds to originate mortgages; they collect fees from lenders.
- Pre-approval is a lender's evaluation determining if a borrower qualifies for a loan or the maximum loan amount.
- Pre-qualification is a loan officer's tentative assessment of how much a lending institution is willing to lend based on borrower information.
- A pre-application and fee agreement provides disclosures to a home buyer before applying for a mortgage.
- A mortgage broker dual agency disclosure form is required when someone acts as both a mortgage broker and a real estate broker in the same transaction.
- A mortgage commitment is a written notice from a lending institution, promising to advance mortgage funds for a home purchase.
- A lender rebate is a payment from a lender to a mortgage broker.
- A non-conforming loan does not meet bank criteria for funding.
- A rate lock is an agreement to hold a specific interest rate on a mortgage for a set period.
- Underwriting is the process where a lender assesses a potential borrower's creditworthiness for a loan.
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