PSI Virginia Real Estate Practice Exam

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What is a conveyance tax based on?

  1. The square footage of the property

  2. The purchase price of a property

  3. The geographical location of the property

  4. Current market trends

The correct answer is: The purchase price of a property

A conveyance tax, also known as a transfer tax, is primarily based on the purchase price of a property. This tax is assessed when real estate is formally transferred from one party to another, and the amount due is directly calculated as a percentage of the sale price. This direct correlation to the purchase price reflects the value of the asset being transferred. Understanding this concept is crucial, as it highlights the importance of accurately reporting the sale price during a property transaction. Other factors such as the square footage of the property, geographical location, or current market trends may influence the value of the property or the real estate market overall, but they do not determine the conveyance tax.

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