chapter018 - CHAPTER 18 SOURCES OF COMERCIAL DEBT AND...

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CHAPTER 18 SOURCES OF COMERCIAL DEBT AND EQUITY CAPITAL Test Problems 1. Double taxation is most likely to occur if the commercial properties are held in the form of a(n): c. C Corporation 2. With regard to double taxation, distributions, and the treatment of the losses, general partnerships are most like: c. Limited Partnerships 3. Special Allocations of income or loss are available if the form of ownership is a(n): c. Limited Partnerships 4. Real Estate Syndicates traditionally have been legally organized most frequently as: c. Limited Partnerships 5. A real estate investment trust generally: d. None of the above 6. Which of the following forms of ownership involve both limited and unlimited liability? a. limited partnerships 7. Which statement is false concerning the limited partnership of ownership? c. The limited partners cannot enjoy tax benefits but the general partners can. 8. Which of these lenders is most likely to provide a construction loan? c. Commercial Bank 9. Which of these loans is a life insurance most likely to invest in? c. Large office building loan (nonconstruction) 10. Which of the financial firms is most likely to invest in a large, long-term mortgage loan on a shopping center? c. Life insurance company 18-1
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Study Questions 1. For what debt in a general partnership is each of the general partners liable? Solution : General partners have unlimited liability and are liable for all debts of the partnership. This includes contractual debts and debts resulting from tort actions against the partnership. General partners are also jointly and severally liable for wrongful acts committed by other partners in the course of the partnership’s business. Therefore, the personal assets of the general partners are subject to the claims of the partnership’s creditors. 2. Why are many pension funds reluctant to invest in commercial real estate? Solution : Pension funds have historically viewed real estate as too risky, difficult to manage, and illiquid. Addtionally, the lack of available information for performing quantitative investment analysis has also contributed to the reluctance of pension funds to invest in real estate. 3. Discuss the role life insurance companies play in financing commercial real estate. Solution : Given the long-term nature of their liabilities, life insurance companies prefer to invest in assets on a long-term basis. They are a major source of commercial real estate capital and are heavily involved in the long-term commercial mortgage market.
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This note was uploaded on 03/31/2008 for the course REAL 3000 taught by Professor Peng,liang during the Spring '08 term at Colorado.

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chapter018 - CHAPTER 18 SOURCES OF COMERCIAL DEBT AND...

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