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4. Homer owns Simpsonacre, and decides to transfer ownership of his property to his friend Flanders for $50,000 to raise capital to open a
4. Homer owns Simpsonacre, and decides to transfer ownership of his property to his friend Flanders for $50,000 to raise capital to open a beer parlour. The transfer documents allow Homer to remain in his house rent-free for the duration of the agreement. Homer also has the option of having the property transferred back to him if, within 5 years, he repays Flanders the $50,000. The main purpose of this transaction was for Homer to offer land as security for a loan from Flanders. Which of the following is TRUE? (1) This is a transfer agreement which will be fully carried out if Homer does not repay Flanders the $50,000 within 5 years. (2) The transaction is a mortgage. After 5 years, Homer cannot regain title to the property. (3) This is a transfer agreement. However, because Homer has an equity of redemption, Flanders can recover his $50,000 upon demand. (4) The agreement is a disguised mortgage and Homer will have the right to redeem Simpsonacre free and clear upon repaying Flanders the $50,000.
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