Annual property taxes are $4,800. Using a 360-day year (30 days per month), closing occurs on September 1 and the closing day belongs to the buyer. How much does the seller owe the buyer as a tax proration credit?
Correct Answer
B) $3,200
The seller is responsible for January 1 through August 31. Using a 360-day year (30 days per month), that is 8 months × 30 days = 240 days. The daily tax rate is $4,800 ÷ 360 = $13.33. The seller's proration is 240 × $13.33 = $3,200, which is credited to the buyer at closing.
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