CRPA Tax, Legal, & Financial Considerations

Question 1

What is a capital gain in real estate?

Accepted Answer

The profit from the sale of a property

Answer

A capital gain in real estate refers to the profit realized when a property is sold for a price higher than its adjusted cost basis. This gain is calculated by subtracting the original purchase price plus any capital improvements and selling expenses from the final sale price. Capital gains are typically subject to taxation, making it an important consideration for property owners and investors.

Question 2

Which tax document reports real estate income?

Accepted Answer

Schedule E

Answer

Schedule E (Supplemental Income and Loss) is the correct IRS form used to report income or loss from rental real estate, royalties, partnerships, S corporations, and trusts. For real estate investors and landlords, this schedule is essential for detailing rental income, expenses, and depreciation, ultimately determining the net taxable income or loss from their property holdings.

Question 3

What is the purpose of title insurance?

Accepted Answer

To cover loss from title defects

Answer

Title insurance protects both the buyer and the lender from financial loss due to defects in a property's title that were not discovered during the title search. These defects can include undisclosed heirs, forged documents, liens, or errors in public records. It provides peace of mind by ensuring clear ownership and safeguarding against future claims on the property.

Question 4

Which legal document transfers property ownership?

Accepted Answer

Deed

Answer

A deed is the legal document that formally transfers ownership of real property from one party (the grantor) to another (the grantee). It contains a legal description of the property and must be properly executed, delivered, and accepted to be valid. Recording the deed in public records provides official notice of the ownership change.

Question 5

What is escrow in real estate?

Accepted Answer

A neutral holding account for transactions

Answer

Escrow in real estate refers to a neutral third party that holds funds and documents related to a transaction until all conditions of the sale agreement are met. This ensures that both the buyer and seller fulfill their obligations before the property and money change hands. It provides security and impartiality throughout the closing process.

(CRPA) Certified Relocation Professional Appraiser Practice Test

(CRPA) Certified Relocation Professional Appraiser Practice Test

CRPA Tax, Legal, & Financial Considerations