CCIM 101 EXAMINATION MANUAL QUESTIONS AND
SOLUTIONS GRADED A+
✔✔True of false: Leasing commissions are included in Operating Expense? - ✔✔False -
they are included in Cash Flow Before Taxes.
✔✔What is Net Present Value? - ✔✔NPV is the difference between the present value of
cash inflows and the present value of cash outflows over time.
✔✔True of false: For commercial and investment properties, loan costs paid at time
period zero are deducted in full in the year they are paid. - ✔✔False - they are
amortized over the full term of the loan. Any unamortized costs are expenses in the year
the loan is paid off.
✔✔A REIT must distribute what percent of its taxable income to stockholders every
year? - ✔✔90%
✔✔True or False: a REIT is subject to corporate-level tax on the taxable income it
distributes to stockholders. - ✔✔False. A REIT must pay out at least 90% of its taxable
income as dividends. Since those dividends are actually the taxable portion of the
income generated by the REIT-owned properties, the company is able to pass its tax
burden to shareholders rather than pay Federal taxes itself.
✔✔What is Section 1231 property? - ✔✔Section 1231 property is real or depreciable
business property (such as a commercial building) held for more than one year.
A section 1231 gain from the sale of a property is taxed at the lower capital gains tax
rate versus the rate for ordinary income. If the sold property was held for less than one
year, the 1231 gain does not apply.
✔✔The basis for a property that is purchased equals the purchase price plus what? -
✔✔Plus any capitalized acquisition costs (not financing costs.)
✔✔Purchase price + acquisition costs = [XXXX] basis - ✔✔Original (acquisition) basis
✔✔The portion of basis allocated to improvements or personal property is called what?
- ✔✔Depreciable basis
✔✔The goal of a cost segregation study is what? - ✔✔To use the engineering reports of
a property to segregate assets into personal property, land improvements, buildings and
land categories, with the objective of identifying assets that can be depreciated over a
shorter tax life. (See 5.12 in coursebook)
SOLUTIONS GRADED A+
✔✔True of false: Leasing commissions are included in Operating Expense? - ✔✔False -
they are included in Cash Flow Before Taxes.
✔✔What is Net Present Value? - ✔✔NPV is the difference between the present value of
cash inflows and the present value of cash outflows over time.
✔✔True of false: For commercial and investment properties, loan costs paid at time
period zero are deducted in full in the year they are paid. - ✔✔False - they are
amortized over the full term of the loan. Any unamortized costs are expenses in the year
the loan is paid off.
✔✔A REIT must distribute what percent of its taxable income to stockholders every
year? - ✔✔90%
✔✔True or False: a REIT is subject to corporate-level tax on the taxable income it
distributes to stockholders. - ✔✔False. A REIT must pay out at least 90% of its taxable
income as dividends. Since those dividends are actually the taxable portion of the
income generated by the REIT-owned properties, the company is able to pass its tax
burden to shareholders rather than pay Federal taxes itself.
✔✔What is Section 1231 property? - ✔✔Section 1231 property is real or depreciable
business property (such as a commercial building) held for more than one year.
A section 1231 gain from the sale of a property is taxed at the lower capital gains tax
rate versus the rate for ordinary income. If the sold property was held for less than one
year, the 1231 gain does not apply.
✔✔The basis for a property that is purchased equals the purchase price plus what? -
✔✔Plus any capitalized acquisition costs (not financing costs.)
✔✔Purchase price + acquisition costs = [XXXX] basis - ✔✔Original (acquisition) basis
✔✔The portion of basis allocated to improvements or personal property is called what?
- ✔✔Depreciable basis
✔✔The goal of a cost segregation study is what? - ✔✔To use the engineering reports of
a property to segregate assets into personal property, land improvements, buildings and
land categories, with the objective of identifying assets that can be depreciated over a
shorter tax life. (See 5.12 in coursebook)
