Unit 11: Ethics, Investment Properties, Income tax, Trust Accounts, Environmental Issues Flashcards Preview

NC Real Estate License > Unit 11: Ethics, Investment Properties, Income tax, Trust Accounts, Environmental Issues > Flashcards

Flashcards in Unit 11: Ethics, Investment Properties, Income tax, Trust Accounts, Environmental Issues Deck (26)
Loading flashcards...
0
Q

Radon

A

Odorless colorless gas mitigated by adding ventilation

EPA levels under 4.0 picocuries per liter

1
Q

Asbestos

A

Better to encapsulate it instead of abating it.

2
Q

Property built before this date requires seller to give buyer a lead base paint disclosure

A

January 1, 1978

3
Q

Earnest money

A

Must be deposited into BROKER’s trust account

4
Q

Commingling

A

Depositing client’s money into the same account with the broker’s money

5
Q

Conversion

A

Using trust funds for personal reasons

6
Q

Equity

A

Current value minus debt

7
Q

1031 exchange

A

Tax advantage of real estate ownership that allows one to defer tax liability

8
Q

Fraud

A

Willful intent to misrepresent or omit material facts

9
Q

Willful misrepresentation or omission

A

Intentionally misinforming or withholding material fact

10
Q

Negligent misrepresentation or omission

A

Unintentionally misinforming or withholding of a material fact

11
Q

Real estate professionals must disclose the following:

A

Whom they represent

Obligations of all parties

Whether they are principal in the transaction

If there may be any environmental, material, or other issues that may impact the property

12
Q

General partnership

A

All partners have equal share and liability

13
Q

Limited partnership

A

Silent partners with no part in daily mgmnt.

Liability is limited to their investment

Advantageous to owners who want to own but not manage day to day decisions

14
Q

Cash flow after debt service ( before tax cash flow or cash throw off)

A

What money is left after the property has paid all expenses including investor loans

15
Q

Allowable tax deductions on 1st and 2nd Residences.

Must use an itemized tax return to take deductions

A

Property taxes

Mortgage interest

Points paid to improve or acquire

Some loan origination fees (points/origination/interest/and taxes)

16
Q

Non deductible taxes

A

Home owners insurance

HOA dues

Repairs such as painting or capital improvements

Costs to obtain loan : appraisals, credit reports

17
Q

Capital gains

A

Short term gain on property held 12 months or less, taxed at ratepayer’s ordinary income tax rate

Long term gain on property held more than 12 months

18
Q

Taxation of gain on sale of primary residence

A

Excluded from full tax as follows:

$250,000 maximum if single or married filing separately

$500,000 maximum if married filing jointly

19
Q

Capital gain calculation

A

Amount realized/adjusted sales price: (sales price minus selling expenses)

Minus

Adjusted basis (acquisition cost/tax basis + cost of capital improvements and special assessments)

20
Q

Real estate investors can take a depreciation allowance on real estate improvements for how many years?

A

27 for residential property

39 for commercial property

21
Q

Trust account

A

Brokerage firm required to maintain to hold earnest $$, tax and insurance and unearned commissions

22
Q

Environmental issues and disclosure requirements and EPA

A

Environmental issues are considered material facts that must be disclosed by the seller and the brokers

Brokers who suspect an environmental issue that may affect the property must disclose it, even if the seller believes it should be cured or removed.

23
Q

Lead based paint hazard reduction act of 1992.

A

Seller must disclose:

Location of any known lead based paint

Provide a copy of any report on the home

Give copy of the EPA pamphlet

Offer 10 day period to have home tested (buyer may refuse)

Seller NOT obligated to remove lead paint

24
Q

Carbon monoxide

A

Odorless gas that is a byproduct of combustion

Many states require that properties have CO detectors . NC requires detectors in any residences that has appliances or heating systems that burn fossil fuel such as oil or gas

25
Q

Mold

A

Not all are hazardous

Many do require remediation (removal) done by EPA and state regulations

Sellers must disclose any past or present mold issue