Tennessee Realtor State Practice Exam

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Which of the following is an example of commingling in Tennessee?

Holding client deposits in a personal account
Depositing client funds into the firm's operating account
Keeping trust funds separate from business expenses
Mixing client funds with company profits

The correct answer is: Depositing client funds into the firm's operating account

The example of commingling in Tennessee involves depositing client funds into the firm's operating account. Commingling refers to the improper mixing of funds that should be kept separately, such as client funds and the business's operating funds. In real estate, it is essential for agents and brokers to keep client trust deposits separate to ensure these funds are protected and properly accounted for. By placing client funds into the firm's operating account, the agent or broker is not maintaining the necessary separation required by law and ethical standards, potentially leading to misuse of those funds or accounting errors. While holding client deposits in a personal account or mixing client funds with company profits also represent improper handling of funds, they highlight different aspects of financial misconduct. Keeping trust funds separate from business expenses correctly complies with best practices and legal requirements, ensuring that trust funds remain secure and for their defined purposes. However, depositing client funds into the firm's operating account specifically exemplifies commingling, as it directly refers to the mixing of client funds with general business finances.