Chapter 6- Book Quiz (plus)

Who runs the business in a general partnership?

• one or more silent partners

• both general and silent partners equally participate

• one or more general partners

• professional manager hired by the partnership

Answer explanation

The answer is one or more general partners. The business is run by general partner(s); the limited partners, sometimes called silent partners, are not legally permitted to participate in the business. (p. 96)

A man owns one of 20 units in a fee simple, along with a 5% ownership share in the parking facilities, recreation center, and grounds. What kind of property does he own?

• cooperative

• condominium

• timeshare

• membership camping

Answer explanation

The answer is condominium. Real estate ownership that involves holding title to an individual unit and a specified share of the undivided interest in the common elements is a condominium. (p. 98)

Two sisters and their brother were concurrent owners of a parcel of real estate. The brother died, and his interest passed according to his will to become part of his estate. This brother was a

• joint tenant

• tenant in common

• tenant by the entirety

• severalty owner

Answer explanation

The answer is tenant in common. If a concurrent owner has the right to dispose of his interests under the terms of a will or the interest passes to heirs, the concurrent owner is a tenant in common. The brother's interest in that tenant is common. (p. 90-91)

A man conveys a vineyard in trust to his sister, with the instruction that any income derived from the vineyard is to be used for his daughter's medical care. Which of the following statements MOST accurately described the relationship of these parties?

• The man is the trustee, the sister is the trustor, and his daughter is the beneficiary.

• The man is the trustor, the sister is the trustee, and his daughter is the beneficiary.

• The man is the beneficiary, the sister is the trustor, and his daughter is the trustee.

• The man is the trustor, the sister is the beneficiary, and his daughter is the trustee.

Answer explanation

The answer is the man is the trustor, the sister is the trustee, and his daughter is a beneficiary. U.S. tour (the man) is the party creating the trust. Title to the vineyard is held by the trustee (the sister) for the benefit of the beneficiary of the trust (the daughter). (p. 94-95)

Ownership that allows possession for a specific time each year is a

• cooperative

• condominium

• timeshare

• trust

Answer explanation

The answer is timeshare. When a party owns a timeshare estate, the party owns the right to use the property for the period specified, possibly a specific week (or weeks) of each calendar year. (p. 102)

Which of the following forms of ownership may be created by operation of law?

• joint tenancy

• tenancy by the entirety

• joint tenancy with right of survivorship

• tenancy in common

Answer explanation

The answer is tenancy in common. “Operation of law” refers to creation by illegal mechanism, such as a statutory law or legal proceeding such as probate, marriage, and so on. While a tendency in common may be created by operation of law, a joint tenancy can only be created by deed or by will. (p. 90-91)

A corporation may own real estate in all of the following manners EXCEPT

• in trust

• in severalty

• in partnership

• in joint tenancy

Answer explanation

The answer is in joint tenancy. A corporation is a recognized legal entity that can hold title to real estate. It may be a sole owner (severalty); it may own real estate and trust (as a trustee); or the corporation may hold title with others as a partner in a partnership. A corporation may not be a joint tenant; it never dies. (p. 97)

An owner purchases an interest in a resort property. The owner is entitled to the right of possession only between July 10 and August 4 of each year. The owner most likely purchased a

• condominium unit.

• time-share estate.

• cooperative unit.

• membership camping interest.

Answer explanation

The answer is timeshare estate. Ownership in a timeshare estate means the right to use the property for a specific period. (p. 102)

Which statement applies to both joint tenancy and tenancy by the entirety?

• There is no right to file a partition suit.

• The last survivor becomes a severalty owner.

• A deed signed by 1 owner will convey a fractional interest.

• A deed will not convey any interest unless signed by both spouses.

Answer explanation

The answer is the last survivor becomes severalty owner. Trust may be created by agreement during a property owner's lifetime (a living trust) or established by the terms of a will. (p. 91-94)

What is a primary disadvantage of a corporation?

• pays taxes twice

• may not be approved for a mortgage loan

• cannot be a joint tenant

• must own property with a co-owner

Answer explanation

The answer is pays taxes twice. One disadvantage of corporations, especially when income-producing property is involved, is double taxation. As a legal entity, a corporation must pay tax on its profits. Dividends from the remaining corporate profits are then distributed to the shareholders and are taxed again as part of the shareholders’ individual income. (p. 97)