Question 1

The following is NOT a factor that determines the best form of ownership for real estate:

Accepted Answer

A)  use of debt financing 
B)  passive loss limitations 
C)  desire to retain earnings 
D)  future inflation expectations 
A)  use of debt financing 
B)  passive loss limitations 
C)  desire to retain earnings 
D)  future inflation expectations D

Question 2

20-21.With an S-corporation the number of shareholders is limited to:

Accepted Answer

A)  100 
B)  50 
C)  35 
D)  15 
A)  100 
B)  50 
C)  35 
D)  15 C

Question 3

20-16.An IRS code criteria for a REIT to qualify as a tax-free entity is:

Accepted Answer

A)  it can not issue transferable shares 
B)  it may be a financial institution or insurance company 
C)  it must derive at least 75% of its gross income from real estate related investments 
D)  it may not hold all of its assets in the form of mortgages 
A)  it can not issue transferable shares 
B)  it may be a financial institution or insurance company 
C)  it must derive at least 75% of its gross income from real estate related investments 
D)  it may not hold all of its assets in the form of mortgages C

Question 4

20-32.Under the Uniform Limited Partnership Act:

Accepted Answer

A)  partnerships must have three or more partners 
B)  the affairs of a partnership must be administered by an unrelated party 
C)  there is no liability for any partner 
D)  there is liability for a general partner 
A)  partnerships must have three or more partners 
B)  the affairs of a partnership must be administered by an unrelated party 
C)  there is no liability for any partner 
D)  there is liability for a general partner

Question 5

20-10.The best form of ownership for large-scale real estate investments is:

Accepted Answer

A)  publicly traded partnership 
B)  REITs 
C)  C-corporation 
D)  a and b 
A)  publicly traded partnership 
B)  REITs 
C)  C-corporation 
D)  a and b

Question 6

The main disadvantage of the sole proprietorship form of ownership is:

Accepted Answer

A)  tax regulations 
B)  issues of liability 
C)  access to capital markets 
D)  none of the above 
A)  tax regulations 
B)  issues of liability 
C)  access to capital markets 
D)  none of the above

Question 7

20-26.One advantage of sole ownership of real estate properties is:

Accepted Answer

A)  no double taxation 
B)  property owners are not personally liable for debts in excess of $25,000 
C)  large portfolios of properties can be easily acquired 
D)  none of the above 
A)  no double taxation 
B)  property owners are not personally liable for debts in excess of $25,000 
C)  large portfolios of properties can be easily acquired 
D)  none of the above

Question 8

20-29.The following is not an advantage of the limited partnership form of ownership of real estate:

Accepted Answer

A)  avoidance of double taxation 
B)  limited liability of the partners 
C)  access to large capital markets 
D)  none of the above 
A)  avoidance of double taxation 
B)  limited liability of the partners 
C)  access to large capital markets 
D)  none of the above

Question 9

20-12.REITs that invest in both equity properties and mortgages are called:

Accepted Answer

A)  combination REITs 
B)  hybrid REITs 
C)  dual purpose REITs 
D)  none of the above 
A)  combination REITs 
B)  hybrid REITs 
C)  dual purpose REITs 
D)  none of the above

Question 10

20-22.Partnerships can be categorized as:

Accepted Answer

A)  general 
B)  limited 
C)  material 
D)  a and b 
E)  all of above 
A)  general 
B)  limited 
C)  material 
D)  a and b 
E)  all of above

Question 11

The main determinants of the form of ownership for real estate are:

Accepted Answer

A)  income tax laws 
B)  issues of liability 
C)  access to capital markets 
D)  a and b 
E)  all of above 
A)  income tax laws 
B)  issues of liability 
C)  access to capital markets 
D)  a and b 
E)  all of above

Question 12

20-23.A partnership is terminated with:

Accepted Answer

A)  the retirement of a partner 
B)  the death of a partner 
C)  the insanity of a partner 
D)  all of the above 
A)  the retirement of a partner 
B)  the death of a partner 
C)  the insanity of a partner 
D)  all of the above

Question 13

20-34.Transfer of interest in a Master Limited Partnership is through an instrument such as:

Accepted Answer

A)  stock 
B)  bonds 
C)  assignment of beneficial units 
D)  almost any stock broker 
A)  stock 
B)  bonds 
C)  assignment of beneficial units 
D)  almost any stock broker

Question 14

The main disadvantage of the partnership structure for holding real estate is:

Accepted Answer

A)  tax regulations 
B)  personal liability 
C)  access to capital markets 
D)  none of the above 
A)  tax regulations 
B)  personal liability 
C)  access to capital markets 
D)  none of the above

Question 15

20-36.REITs essentially operate as:

Accepted Answer

A)  mutual funds 
B)  401(k)plans 
C)  real estate brokers 
D)  depository institutions 
A)  mutual funds 
B)  401(k)plans 
C)  real estate brokers 
D)  depository institutions

Question 16

20-18.The individual who owns real estate in his or her name holds it as:

Accepted Answer

A)  sole ownership 
B)  partnership in a community property state 
C)  corporation in New York 
D)  none of the above 
A)  sole ownership 
B)  partnership in a community property state 
C)  corporation in New York 
D)  none of the above

Question 17

The following ownership structures can be used to hold real estate:

Accepted Answer

A)  sole proprietorship 
B)  corporation 
C)  partnership 
D)  all of the above 
A)  sole proprietorship 
B)  corporation 
C)  partnership 
D)  all of the above

Question 18

The main disadvantage of the S-corporation form of ownership is:

Accepted Answer

A)  tax regulations 
B)  issues of liability 
C)  access to capital markets 
D)  none of the above 
A)  tax regulations 
B)  issues of liability 
C)  access to capital markets 
D)  none of the above

Question 19

The following is a type of REIT:

Accepted Answer

A)  equity 
B)  mortgage 
C)  hybrid 
D)  a and b 
E)  all of the above 
A)  equity 
B)  mortgage 
C)  hybrid 
D)  a and b 
E)  all of the above

Question 20

20-27.A characteristic of the C-corporation ownership of real estate is:

Accepted Answer

A)  double taxation 
B)  access to large equity markets 
C)  limited liability 
D)  all of the above 
E)  none of the above 
A)  double taxation 
B)  access to large equity markets 
C)  limited liability 
D)  all of the above 
E)  none of the above

Exam 20: Ownership Structures for Financing and Holding Real Estate

The following is NOT a factor that determines the best form of ownership for real estate:

20-21.With an S-corporation the number of shareholders is limited to:

20-16.An IRS code criteria for a REIT to qualify as a tax-free entity is:

20-32.Under the Uniform Limited Partnership Act:

20-10.The best form of ownership for large-scale real estate investments is:

The main disadvantage of the sole proprietorship form of ownership is:

20-26.One advantage of sole ownership of real estate properties is:

20-29.The following is not an advantage of the limited partnership form of ownership of real estate:

20-12.REITs that invest in both equity properties and mortgages are called:

20-22.Partnerships can be categorized as:

The main determinants of the form of ownership for real estate are:

20-23.A partnership is terminated with:

20-34.Transfer of interest in a Master Limited Partnership is through an instrument such as:

The main disadvantage of the partnership structure for holding real estate is:

20-36.REITs essentially operate as:

20-18.The individual who owns real estate in his or her name holds it as:

The following ownership structures can be used to hold real estate:

The main disadvantage of the S-corporation form of ownership is:

The following is a type of REIT:

20-27.A characteristic of the C-corporation ownership of real estate is:

Finance and Real Estate

Money Credit and the Determination of Interest Rates

Finance Theory and Real Estate

The Early History of Residential Finance and Creation of the Fixed Rate Mortgage

Modern Residential Finance

Alternative Mortgage Instruments

Financing and Property Values

Federal Housing Policies: Part 1

Federal Housing Policies: Part 2

The Secondary Mortgage Market

Valuation of Mortgage Securities

Controlling Default Risk Through Borrower Qualification Loan Underwriting and Contractual Relationships

Loan Origination, Processing, and Closing

Mortgage Default Insurance, Foreclosure, Title Insurance

Value, Leverage, and Capital Structure

Federal Taxation and Real Estate Finance

Sources of Funds for Commercial Real Estate Properties

Acquisition, Development, and Construction Financing

Permanent Financing of Commercial Real Estate Properties

Real Estate in a Portfolio Context

Liability, Agency Problems, Fraud, and Ethics in Real Estate Finance

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