A Guide to the GRE/Explaining Facts

= Explaining Facts =

Overview
Identify the fact that the question asks you to explain and the reasons surrounding that fact.

From 1993 to 1997 the local government passed a series of enactments which were very friendly to tenants and landlords, giving tenants greater rights against landlords in court with regard to rent disputes and evictions. Surprisingly, however, landlords' average profits per residential tenant increased after the enactments were passed.

Which of the following most explains why profits per tenant increased after the enactments?

(A) The total number of residential rental units increased from 1993 to 1997. (B) Many landlords ceased renting to persons with low incomes or questionable rental histories after the enactments in question. (C) Income from commercial rentals increased after the 1993 enactments. (D) The government also repealed old enactments giving special rights to tenants as part of the enactments in question. (E) The majority of rental agreements do not lead to either rent disputes or evictions.

The correct answer is choice (B). The key is that profits per residential tenant increased. The explanation is that landlords simply ceased renting to lower-income tenants altogether. 4.04 Explaining Facts

Practice
A “depreciating asset” is one that is bound to continue losing value over time. Depreciating assets are never a good investment for the long-term because they are bound to be worth less than one paid for them. Given this reality, it is strange that Raritan Holdings in its acquisition of Casimir, Inc., wanted Casimir's severely depreciating real estate rental properties so badly.

1. Which one of the following, if true, most explains why Raritan Holdings. would want to make sure it acquired the real estate rental properties in the acquisition?

(A) Acquired depreciated assets can be used to  reduce tax liability of Raritan Holdings. (B) Raritan Holdings acquired many appreciating  assets in the deal as well. (C) The depreciating assets had already lost most of their value. (D) Some assets neither appreciate nor depreciate, but tend to hold their value. (E) The gross national product in the rental sector has increased in recent years.

About one fourth of the horses at Lorimer Valley Downs that were under 3 years of age needed to be visited by the veterinarian this year. Interestingly, those over 3 years of age were less likely to need to be visited by the veterinarian, though about a fifth of them still did need such a visit.

2. Which one of the following statements, if true, most helps to explain while older horses at Lorimer Valley Downs were less likely to need veterinary visits?

(A) Lorimer Valley Downs has its employees do basic health examinations for all its horses, regardless of their age. (B) Riders of older horses are typically more gentle with them than they are with younger horses. (C) The older a horse becomes, the more likely the horse will be retired from Lorimer Valley Downs due to a decrease in speed. (D) Most younger horses at Lorimer Valley Downs tend to be of significantly different breeds than the older horses. (E) The majority of illnesses that afflicted the younger horses could have been avoided with better regular checkups.

Answers to Practice Questions
1. (A)

Choice (A) explains the fact because if the assets can reduce tax liability, they will provide a benefit to their new owner, even if depreciating - and this tax benefit may in fact prove to be greater than any future depreciation.

2. (B)

Answer (B) explains the fact because if the riders are nicer to the older horses, there will tend to be fewer injuries amongst these older horses. While answer (C) is tempting, remember that the fact is amongst horses which are at Lorimer; thus, it doesn't matter if many older horses are retired; the older ones which are still there are still less likely to need medical attention.