A resale home in Ontario closes on March 15 in a 365-day year. The seller has already paid the full annual property tax of $3,650. Under the standard Agreement of Purchase and Sale, where the day of completion is apportioned to the buyer, how much does the buyer credit the seller?
Correct Answer
B) $2,920
The daily tax is $3,650 / 365 = $10. The seller owns January 1 to March 14 (31 + 28 + 14 = 73 days) and the buyer owns March 15 to December 31 (292 days, including closing day). The buyer credits the seller 292 x $10 = $2,920 for tax the seller prepaid on the buyer's days.
Why This Is the Correct Answer
At $10 a day, the seller is responsible for 73 days (January 1 to March 14) and the buyer for 292 days (March 15 to December 31). Since the seller paid all 365 days, the buyer credits the seller for the buyer's 292 days: 292 x $10 = $2,920.
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