Annual property taxes are $3,600. The property closes on July 1 and taxes are paid in arrears. Using a 360-day year (30 days per month), what is the seller's proration debit (amount the seller owes the buyer at closing)?
Correct Answer
B) $1,800
Using a 360-day year, the daily tax rate = $3,600 ÷ 360 = $10/day. The seller is responsible for taxes from January 1 through June 30 (the day before closing), which equals 6 months × 30 days = 180 days. Seller's proration debit = 180 days × $10/day = $1,800. Because taxes are paid in arrears, the seller credits the buyer $1,800 at closing to cover the seller's share of the annual tax bill.
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