Free SERIES 7 Exam Braindumps (page: 47)

Page 46 of 101

Which of the following does not decrease basis?

  1. cash or property paid out
  2. depletion of real property
  3. losses
  4. income from extraordinary sources

Answer(s): D

Explanation:

income from extraordinary sources. Single events, such as the sale of property, do not affect basis.



What is the importance of the “at risk” rule?

  1. it limits deductions to the amount at risk
  2. it limits liability to the amount at risk
  3. deductions for interest may not exceed investment income
  4. it prevents carry forward of disallowed interest deductions

Answer(s): A

Explanation:

it limits deductions to the amount at risk. Deductions may not exceed contributed capital.



What is the possible reward for investing in raw land?

  1. deferred income
  2. large deductions
  3. potential capital appreciation
  4. lack of investment risk

Answer(s): C

Explanation:

potential capital appreciation. This is the only correct choice. Any income is not deferred, raw land cannot be depreciation for a large deduction, and there is substantial risk.



In a triple net lease, which of the following is the tenant not responsible for paying?

  1. taxes
  2. financing charges
  3. insurance premiums
  4. maintenance

Answer(s): B

Explanation:

financing charges. In a triple net lease, the tenant is responsible for taxes, insurance, and maintenance.






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