CRPA Tax, Legal, & Financial Considerations 3 — Questions and Answers
Question 1: In a relocation appraisal context, 'anticipated sales price' (ASP) differs from market value primarily because it:
- Excludes personal property from the valuation
- Reflects the likely price achievable within a specific corporate timeframe (Correct answer)
- Is always higher than market value to protect the employee
- Is determined solely by tax assessors
Correct answer: Reflects the likely price achievable within a specific corporate timeframe
ASP accounts for the time constraints of a corporate relocation sale, which may differ from the broader market value achievable with unlimited exposure time.
Question 2: Which legal concept protects a relocation management company that purchases a home from an employee and resells it from double-transfer-tax liability in many states?
- Qualified intermediary exemption
- Simultaneous closing provision
- Corporate conveyance exemption (Correct answer)
- Eminent domain carve-out
Correct answer: Corporate conveyance exemption
Many states offer a corporate conveyance exemption that waives or reduces transfer taxes when a relocation company holds title briefly before reselling to the end buyer.
Question 3: A transferee's capital gain exclusion on the sale of a primary residence under IRC Section 121 requires ownership and use for at least:
- 1 of the last 3 years
- 2 of the last 5 years (Correct answer)
- 3 of the last 7 years
- 5 of the last 10 years
Correct answer: 2 of the last 5 years
IRC Section 121 allows exclusion of up to $250,000 ($500,000 MFJ) of gain if the taxpayer owned and used the home as a primary residence for 2 of the 5 years before the sale.
Question 4: A reduced exclusion under IRC Section 121 may be available when a taxpayer fails the 2-of-5-year test due to:
- A voluntary job change to a higher-paying position
- A change in place of employment, health, or unforeseen circumstances (Correct answer)
- Purchase of a larger replacement property
- Rental of the home for more than 12 months
Correct answer: A change in place of employment, health, or unforeseen circumstances
IRS regulations allow a partial exclusion when the sale is due to a change of employment location, health reasons, or qualifying unforeseen circumstances.
Question 5: In relocation financial counseling, which document outlines all estimated costs associated with the sale of the employee's current home?
- Comparative Market Analysis (CMA)
- Net Equity Analysis (NEA) (Correct answer)
- Broker Price Opinion (BPO)
- Uniform Residential Appraisal Report (URAR)
Correct answer: Net Equity Analysis (NEA)
The Net Equity Analysis estimates the employee's proceeds after deducting selling costs, mortgage payoff, and other expenses from the anticipated sales price.
Question 6: Under USPAP, a relocation appraisal that is completed for a corporate client is subject to the same standards as any other appraisal because:
- ERC guidelines supersede USPAP for corporate clients
- USPAP applies to all appraisal practice regardless of client type (Correct answer)
- Only federally related transactions require USPAP compliance
- Corporate clients may waive USPAP requirements in writing
Correct answer: USPAP applies to all appraisal practice regardless of client type
USPAP standards apply to all appraisers in all appraisal assignments regardless of client type, purpose, or use of the appraisal.
Question 7: An employee who receives a loss-on-sale benefit from their employer to cover the difference between purchase price and net sale proceeds will typically have that benefit treated as:
- A non-taxable business expense reimbursement
- Taxable ordinary income subject to withholding (Correct answer)
- A capital loss passed through to the employee's return
- A tax-free moving expense exclusion
Correct answer: Taxable ordinary income subject to withholding
Loss-on-sale benefits are considered additional compensation and are taxable as ordinary income, often triggering gross-up payments from the employer.
CRPA Tax, Legal, & Financial Considerations 3
In a relocation appraisal context, 'anticipated sales price' (ASP) differs from market value primarily because it: