California: “Consumer Protection Investment” Questions only (no answers)
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1. Which of the following would not be a motivation for doing an exchange?
a. Consolidation
b. Management relief
c. Estate planning
d. Cashing out of real estate
California: “Consumer Protection Investment
2. Which of the following would not be considered of like-kind property?
a. Improved real estate for unimproved real estate
b. Office building for retail center
c. Real property for personal property
d. Mexican gold coins for Austrian gold coins
3. FIRPTA refers to _______.
a. Withholding rules applicable to foreign seller of U.S. property
b. Section 1031 rules
c. State withholding for non-resident
d. Classification of types of business assets
4. An example of an exchange for the purposes of management relief might be _______.
a. Multiple rental properties for single-user commercial property
b. Apartment building for single family rental properties
c. Triple-net leased property for farmland
d. Mineral rights for water rights
5. Which of the following would be a safe harbor rule for doing a delayed exchange?
a. The use of a “Qualified Intermediary”
b. Hiring an attorney
c. Residing in the residence any two of the last five years
d. Using a real estate broker
6. Which is a reason why advisors recommend that taxpayers hold property for a minimum of at least 24 months?
a. It is a rule in the tax code
b. IRS stated that 2 years is a sufficient holding period in a private letter ruling
c. The property would qualify for short-term capital gains treatment
d. To get the best possible offer in selling the property
7. The scope of “like-kind” in personal property would be considered:
a. Narrow
b. Broad
c. Irrelevant
d. Undefined
8. Property within the United States could be exchanged for property in _______.
a. India
b. France
c. Any foreign country
d. Guam
9. All of the following would be considered an interest in real property except:
a. Building materials
b. Oil and gas royalties
c. Easements
d. Leasehold interest
10. In Revenue Procedure 2008-16 (Vacation Home Guidance): During the qualifying use period, the taxpayer’s personal use of the dwelling unit cannot exceed the greater of __ days or 10 percent of the number of days during the 12-month period the dwelling unit is rented at a fair rental.
a. 7
b. 21
c. 24
d. 14
11. Investment properties may include which of the following?
a. Apartment buildings
b. Shopping centers
c. Rental houses
d. All of the answers shown
12. If you think of investment real estate as a money machine, the main parts of the machine are:
a. Income
b. Expenses
c. Financing
d. All of the answers shown
13. If any one of the three parts of an investment property (income, expenses or _______) changes, the investment value of the property changes.
a. financing
b. employment
c. demand
d. none of the above
14. The financial benefits of owning investment real estate include:
a. Cash flow before tax
b. Principal reduction
c. Tax Savings
d. All of the answers shown
15. How important is it for investors to use accurate/realistic income and expenses when analyzing a rental property?
a. Not important
b. Slightly important
c. Very important
d. None of the answers shown
16. If the annual rent is $22,000 and the vacancy $2,000, the gross operating income is:
a. $20,000
b. $10,000
c. $15,000
d. $24,000
17. The “Float and Desire” method is also called
a. Power Finance Method
b. Hires Theory
c. Band of Investment Theory
d. Negative Asset Method
18. Which of the following is depreciated over a 27.5-year period?
a. Residential building
b. Shopping centers
c. Land improvements
d. Gas stations
19. All of the following are operating expenses except:
a. Painting
b. Insurance
c. Mortgage payments/debt service
d. Repairs
20. If the net operating income is $15,000 and the annual debt service is $12,500, the cash flow before tax is:
a. $500
b. $1,500
c. $2,500
d. $3,000
21. Cost recovery is another term for:
a. a stay in the hospital.
b. depreciation.
c. stock market losses.
d. None of the answers shown
22. Which of the following is depreciated over 15 years?
a. Land
b. Building
c. Personal property
d. Land improvements
23. Which of the following is depreciated over 5 years?
a. Land
b. Building
c. Personal property
d. Land improvements
24. Which of the following is not depreciated?
a. Land
b. Building
c. Personal property
d. Land improvements
25. If the gross operating income is $40,000 and the operating expenses are $18,000, the NOI is:
a. $58,000.
b. $9,400.
c. $22,000.
d. $500.
26. The “ingredients” for the “Float and Desire” method include:
a. net operating income.
b. down payment.
c. cash on cash required.
d. All of the answers shown
27. The “Float and Desire” worksheet is used to:
a. determine the homeowner (owner occupied) value of a property.
b. determine the investment value of a property.
c. determine the gross weight of a property.
d. determine the location of a property.
28. Cash flow before tax divided by cash invested is the formula for:
a. price per unit.
b. cash on cash.
c. cap rate.
d. gross multiplier.
29. The net operating income is $24,000. The cost is $300,000. The cap rate would be:
a. $35,000.
b. not enough information to calculate.
c. 8%.
d. None of the answers shown
30. The cash invested is $40,000. The cash flow before tax is $2,800. The cash on cash is:
a. 9%.
b. 1%.
c. 7%.
d. None of the answers shown
31. The definition of a capital asset is that the benefits will extend beyond one year and it is ______.
a. Not bought or sold in the usual course of business
b. Bought or sold in the usual course of business
c. Not tangible
d. Not moveable
32. GDP stands for ______.
a. General Domestic Product
b. Gross Domestic Product
c. Gross Dedication Product
d. General Domestic Property
33. The definition of Gross Domestic Product is the total amount of goods produced, and services provided, in a country during a ________ year period.
a. One
b. Two
c. Three
d. Four
34. GDP is often used as an indicator of ______, as well as a gauge of a country’s standard of living.
a. Foreign policy
b. The economic health of a nation
c. Racial composition of the economy
d. Population decreases
35. Investors are very concerned about negative GDP, which is one of the factors economists often use to determine whether an economy is ______.
a. In a recession
b. Showing a population decrease
c. Showing a population increase
d. Gaining in political strength
36. Within the _______ day period before the conditional permanent residence expires, the investor must submit evidence documenting that the required investment has been made and that 10 jobs have been maintained, or 10 jobs have been created or will be created within a reasonable time period.
a. 90
b. 75
c. 60
d. 30
37. The EB-5 Program reached capacity for the first time in ________ when the State Department stopped issuing EB-5 visas until the beginning of the next fiscal year, October 2014.
a. September 2014
b. January 2013
c. August 2012
d. August 2014
38. When buying a home in the United States, foreign buyers often pay cash because ______.
a. It’s a much easier and quicker process
b. Foreign buyers can never get loans in the U.S.
c. Foreign buyers can never get loans in their county
d. It is required in the U.S.
39. Hard money lenders charge a _______ interest rate for a perceived _______ risk.
a. Higher, higher
b. Higher, lower
c. Lower, higher
d. Lower, lower
40. Hard money loans are usually granted by ________.
a. Private investors
b. Private companies
c. Either of the answers shown
d. Neither of the answers shown
41. What is the percentage of creditors that use FICO scores to determine credit worthiness?
a. 100%
b. 95%
c. 90%
d. 85%
42. A person’s FICO score is actually ______ scores, each with a specific purpose.
a. 9
b. 29
c. 39
d. None of the answers shown
43. In order to be considered as having “bad” credit, a person must have a general FICO credit score of ______ or below.
a. 580
b. 600
c. 610
d. 618
44. Homebuyers with excellent credit often obtain interest rates ____ those buyers with poor credit.
a. The same as
b. Significantly lower than
c. Higher than
d. Significantly higher than
45. Joe has a high balance on his Citibank credit card. In order to get his spending under control, he closes the account, but continues to make monthly payments. What will happen to his overall credit score?
a. It will continue to improve as the balance is paid off
b. It will not change, because there is no impact in closing an account with a balance as long as he continues to pay the monthly payment
c. It will go down because his overall available credit will decrease, while the balance still exists
d. Nothing, because it is not possible to close an account with an open balance
46. When buying a home, a borrower with excellent credit can often afford a _______ home with ________ payments.
a. More expensive / higher payments
b. Less expensive / lower payments
c. More expensive / lower payments
d. Larger / higher payments
47. Sally always pays the entire balance on her Macy’s, Neiman Marcus, Target, Home Depot, Lowe’s, Sears, or Best Buy card, but her credit score is only in the “good” range. What could be the cause?
a. Number of open accounts
b. No balance on the cards
c. No payment history on the accounts
d. All of the answers shown
48. A person’s credit score is primarily based upon information dating back _____ months.
a. 12
b. 24
c. 36
d. 48
49. Appropriate uses for a family’s emergency fund would be to _________.
a. Take a vacation
b. Pay for a new water well
c. Buy new furniture
d. Finish the basement in their home
50. Joan has a number of revolving credit accounts. While she keeps her balances low, she often makes double payments and then skips a month while she is away for business. As a “road warrior,” she is often away from home for two months at a time. What should she consider to avoid damaging her credit?
a. Call up her creditors and explain the situation
b. Pay her bills monthly via the internet on or before the due date
c. Keep on doing what she is doing because it is not hurting her credit
d. Close the accounts
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