Reu3ch14-16

What are two reasons for making land the basis of taxation?

What is a taxing district? Give several examples.

What appraisal methods do tax assessors use to determine the assessed value of a property?

What is the level of assessment?

How is the gross tax figured?

What are some circumstances that typically trigger a reassessment of a property?

If an assessed value is appealed, what happens if the taxpayer and the assessing official do not agree on the resolution of the issues or if the results of the informal meeting are not forwarded to the Property Tax Assessment Board of Appeals within the required time frame?

What types of properties are automatically wholly exempt from property taxation?

What is a "homestead exemption?"

Briefly explain the two tax credits available in Indiana?

What are four exemptions granted in Indiana to certain classes of property owner?

Taxing Entities

no federal ad valorem taxes, only federal tax on income and gain; federal government can impose a ___ ___against real property

Purpose of Taxation

raise funds for_____ services

Why Tax Land?

In tax assessment, ____– factors used to level out uneven valuations from one area to another

Gross tax is the sum of the___ tax and the___ ___ credits that the state pays

Tax Increment Finance

Used to pay for new__________
Taxes on commercial property built after the TIF district is created are distributed only to the government that created the particular TIF district

periodic or special revaluing of a single property to account for changes in neighborhoods and properties over time

property improvements completed without the required building permits

property owners can appeal the assessed value of their property
appeals start with the______ official and can progress all the way to the Indiana____ _____

Tax Exempt Properties

_____exemption - a tax exemption of a portion of the assessed value of a property owned and occupied as a family home
Other exemptions - immune from tax: government-owned properties; exempt from taxes: properties owned by non-profit-organizations; certain classes of property owners: age 65 and over, blind or disabled, veterans, property improvements; mortgage exemption for real property or mobile homes with mortgage

Credits

_____ _____– percentage subtracted from homeowner's tax bill; applied after property tax replacement credits are subtracted
___ ___ ___ ___– state program of tax relief; percentage rate is subtracted from the gross tax amount and is paid by the state

What is the purpose of an equalization factor in ad valorem taxation?
It modifies a local tax rate to bring it into conformity with statutory tax rates.
It changes the assessed value of an individual property to make it reflect the assessed values of other properties in the same neighborhood.
It adjusts assessments in a locality to make them more consistent with an average level for the state or other higher level jurisdiction.
It adjusts the amount of the homestead exemption in a certain area to make it proportionally equivalent to the average homestead exemption in other areas.

The level of assessment is
the percentage of market value at which properties are taxed.
the percentage determined by the municipality by which the property is assessed.
the percentage of full or market value at which properties are assessed.
the adjusted value after a percentage determined by a municipality has been subtracted.

Property owners may object to the ___________ but not to the tax rate.

assessed value
tax exemption
tax credit
gross tax

As part of the assessment process, taxing entities sometimes use an equalization process to
adjust millage rates within the district to ensure fairness.
ensure that property owners have nearly equal tax bills.
modify the tax rate from one neighborhood to the next.
smooth out wide discrepancies of assessed values within the district.

The Constitution of the United States specifically prohibits
taxing disabled homeowners.
exorbitant taxes on real property.
federal taxes on real property.
exempting homeowners based on familial status.

_______________ may be established to pay for the cost of a specific improvement or service that benefits that area.
A special assessment
Assessing units
An exemption
A special tax district

Assessors are usually not allowed to do "spot" assessments of individual parcels unless
a property has not been assessed for a statutory number of years.
zoning has changed since the last assessment.
a new owner has taken possession since the last assessment.
a material change in the property has been reported.

What is the role of local tax districts?
To levy income, sales, and property taxes to meet their budget requirements
To manage their budgeted portion of real estate tax revenues levied and distributed by the state
To impose property taxes for specific municipal services
To place tax liens on its facilities

To qualify for a homestead exemption, a property owner generally must
reside on the property.
have a house on the property.
be 55 years old.
have children.

Assessed value is determined
according to fair market value.
by the improvements completed on the land.
by the county assessors.
by a complex formula using credits and discounts.

The high school district in your town needs operating funds. How does it regularly obtain them?

What is the gross assessed value of a property?

What roles does the Department of Local Government Finance play related to property valuation and assessment?

Local government's spending is the reason for what?

What is a taxing district?

Define tax rate and tax levy.

How is the tax base calculated?

How is a tax rate calculated?

When are Indiana property taxes due?

What is an in rem proceeding, and what does it typically involve?

Is a special assessment a voluntary tax lien or an involuntary tax lien?

What protections might your state offer to a homeowner against the inadvertent loss of ownership for failure to pay property tax?

Property tax process

Also known as property tax_____ and ___ ____
Begins with____ of property's value
Gross assessed value does not include ___ and ____
Net assessed value is gross value minus deductions and exemptions
Value is determined as residential and non-residential for applicable homestead credit only available to residential properties
Department of Local Government Finance reviews and approves assessed value
DLGF also reviews and approves budgets submitted by local unit

Taxing unit is an individual unit of government with authority to ___property tax

___ ___is combination of all taxing units that provide services to one geographical area

is percentage used to determine each taxpayer's taxes per one hundred dollars of net assessed value

Tax___ is the specific amount of property taxes the taxing unit can collect each year

___ ___is the total of the assessed values of all real property within the boundaries of the geographical area, minus exempt properties

Tax rate

Determined by dividing tax_______ (levy) by tax____ (total net assessed value divided by 100)
Tax rate limitations cause taxing bodies to limit their budget requirements

Owner billings

Each owner's bill is determined by multiplying the tax____ for each taxing district times the taxable___ of the property (assessed value after all exemptions and adjustments have been taken into account)

Billing and collection

Indiana property tax payments are due on____ and, with each payment being one half of the total taxes due
Penalties are added for late payments

Tax liens

Tax lien is a lien against real property for failure to pay property taxes
Generates an _____against the property
Take pr/iority over other liens
Remedies include in rem legal proceedings, tax sales or foreclosures
Taxpayer has right to redemption period to repay defaulted taxes or can use equitable right of redemption or statutory right of redemption to redeem property by paying defaulted taxes by certain deadlines

Special assessments

Tax levied against specific properties for public improvement that will benefit the property owners
Creates a___ against property until paid
Based on cost of improvement and are pro rated among benefiting properties
Involuntary tax lien – if assessment is initiated by taxing entity
Voluntary tax lien – if assessment is initiated by_______
Assessed by___ ___
Must specifically benefit the property or can be appealed by property owner
Are always paid___ general taxes and first deed of trust in case of foreclosure
Must be paid before property can be transferred

Prorating taxes

Transfer of property ownership requires prorating of taxes based on date of_____ ___ ____
Can use 365 day method of proration

A special assessment creates a voluntary tax lien if
all taxpayers in a taxing district have voted for it.
the affected property owners have requested the improvement.
a taxing entity initiates the assessment.
the improvement to be funded is for the general good.

The assessed value after all exemptions and adjustments have been taken into account is
the gross tax.
the tax base.
the taxable value.
the tax levy.

Tax rates are determined by
dividing the tax base by the tax levy.
subtracting the tax base from the total tax levy.
subtracting exemptions and credits from the gross value.
dividing the total tax levy by the tax base.

A taxpayer may redeem a foreclosed property after a tax sale if there is
an in rem proceeding.
a homestead exemption.
an equitable right of redemption.
a statutory right of redemption.

The total of the appraised or assessed values of all real property within the area's boundaries, excluding partially or totally exempt properties, is the
tax rate.
tax base.
tax levy.
net tax.

In calculating the tax base of an area,
exemptions are added to assessed values.
exemptions are subtracted from assessed values.
the tax levy is added to the budget shortfall.
the millage rate is multiplied by the tax levy.

What is a tax levy?
The amount of money the municipality must raise through the property tax
A property's assessment of its fair market value
An automatic tax increase due to an increase in property assessments
A tax which is usually paid in installments over a number of years

Indiana taxing administrators discovered that people were more likely to comply with the property tax if
there were penalties invoked on late payments.
they were threatened with a lien.
a tax replacement credit were applied.
the tax did not have to be paid in one lump sum.

The buyer of a tax certificate
obtains immediate legal title to a foreclosed property.
is exempted from the payment of property taxes for one calendar year.
agrees to pay the taxes due on a property in return for the right to apply for a deed.
obtains the right to bid on a property at a tax sale.

What is a tax deed?
A conveyance instrument for a property that is sold to enforce a tax lien
A document recorded in title records showing that property taxes have been paid
A notice to a homeowner that a tax lien has been entered against the property
A document that gives a municipal authority the power to collect an individual tax bill

List four types of brokerages and briefly explain each. (any four of the following)

What is the main difference between an employee and an independent contractor?

What are the three common-law categories that determine the level of control an employer has?

What are the conditions of the IRS safe harbor test?

Due to the potential for broker responsibility for a licensee's actions, what do many brokers require their licensees to carry?

What are the consequences to the broker if an IRS audit reveals that a contractor is actually an employee?

What five topics must be included in every written agreement with an employee or independent contractor?

How can a broker choose to pay his or her licensees?

What is a 100 percent commission plan?

What is the compensation for a licensee who sells one of his or her own listings?

Jack sells one of his own $225,000 listings for $220,000. The commission is 7%. Jack has an 80% commission split with his broker. What is Jack's share of the commission? What is his broker's share?

List five licensee responsibilities to the broker. (other answers can be found on page 33)

Why should an independent contractor keep expense records?

What kind of training do new licensees need?

What kind of training is best for small firms?

What types of information might the policy manual contain about advertising?

What types of information might the policy manual contain about discriminatory practices?

What types of information might the policy manual contain about open houses?

Which of these statements about an independent contractor is true?
He or she gets a regular salary with bonuses.
He or she is reimbursed for all business expenses.
He or she is paid commission on all sales.
He or she will get three weeks of paid vacation every year.

Work agreements must be
renewed each month.
dated and signed by the parties.
notarized.
on file with the State.

Most licensees are hired as
employees.
salaried employees.
independent contractors.
quasi-employees.

As a listing agent, in most cases your listing will be sold by
yourself.
your broker.
a cooperating broker.
an assigned agent.

Which of these statements is TRUE?
Licensee Harry can solicit his own listings.
Licensee Julie can receive her commission from the cooperating broker in her latest transaction.
Licensees must perform all of their activities on behalf of their employing broker.
Broker Tom has only limited responsibility for the actions of his licensees.

What type of methodology works well to ensure that all agents are given and hear the same information?
Memos
Newsletters
Staff Meetings
Office Announcements

For an independent contractor, how is the issue of withholding tax dealt with by the managing broker?
Managing Broker withholds tax monies.
Managing Broker pays all withholding tax monies.
Managing Broker does not withhold tax monies.
Managing Broker escrows all withholding tax monies.

Agent Betty started with ABC Realty making a 1.5% commission on all listings sold. Within 6 months she will be eligible for a 2% commission. What type of program is Agent Betty on?
Progressive
Graduated
Step
Level

In an IRS audit, which of the following situations would cause the IRS to think that a contractor might really be an employee?
The licensee attends sales meetings.
The licensee gets a commission.
The licensee takes unpaid sick days.
The licensee receives an hourly wage.

Which of the following is NOT a licensee's responsibility?
Remain knowledgeable about the license laws
Work to procure new listings for the firm
Provide an appropriate level of office support
Deliver all transaction documents in a timely manner

What are the two most common forms of compensation that brokers use?
Salary draw or escrow draw
Kickback payments and direct deposits
Hourly and flat rates
Salary or a percentage of the commission

Should a policy manual contain a section on referral fees?
No because this should be discussed privately.
No because this should only be shared in the interview meeting.
Yes, provided the MLS Board has a policy.
Yes because all licensees should be given the same information in writing.

Work agreements
should be individualized.
should be signed by all parties and a witness.
should be standardized.
should be notarized and a copy sent to the Real Estate Board office.

Which of the following is typically NOT a licensee's duty to the brokerage?
Work to promote and sell the broker’s listings.
Be appropriately licensed.
Remain knowledgeable about the license laws and rules.
Establish compensation agreements with other ancillary service providers.

Agent Norm just started working for Sunshine Realty. He was required to pay a monthly fee of $120 for a phone and $50 for desk space. The $170 is usually referred to as what?
Allowance Fee
Working Costs
Attendance Fee
Start-up Costs

Which of the following is NOT a responsibility that brokers have to their licensees?
Provide and pay for networking opportunities to allow licensee to make business contacts
Provide access to all the firm’s listings and marketing data
Provide the appropriate level of office support
Provide training

Which of the following must a broker legally provide to an employee?
Pension plan
Unemployment insurance
Health insurance
Sales commission

Which of these guidelines is not part of the IRS safe harbor test?
Income must be based on sales input.
Contractors must have access to workers compensation benefits.
The contractor must be licensed as a real estate salesperson or broker.
There must be a written contract in place.

The policy and procedures manual should include
business agreements.
the firm's commission policy.
itemization of the managing broker's short-term and long-term business goals.
the unique role of each individual employee.

Which of the following statements is FALSE?
A broker may require licensees to carry high levels of automobile insurance.
It's a good idea for brokers to carry workers' compensation coverage.
A broker is not responsible for the acts of independent contractors.
Employee status versus independent contractor status is an IRS issue.

Gladys sells another broker's $300,000 listing for $290,000 at a commission rate of 6%. She has a 60% commission split with her broker. If there is also a 50% brokerage split, what commission will Gladys receive?
$5,220
$8,700
$17,400
$3,480

Who is responsible to ensure that all agents in a brokerage are properly licensed?
The broker
The real estate licensee board
MLS licensee board
State Board of Professional Licensing