A property in Santa Clara County closes on March 20. The annual property tax of $12,000 has not been paid for the current fiscal year (July 1 through June 30). Escrow charges the seller for taxes through and including the day of closing, using a 360-day year and 30-day months. How much property tax will the seller owe at closing?
Correct Answer
C) $8,667
The California property tax fiscal year begins July 1, and on the convention stated here the seller is charged through the closing date, so the seller's period runs July 1 through March 20. With 30-day months, July through February is 8 x 30 = 240 days, plus 20 days of March, for 260 seller days. The daily rate is $12,000 / 360 = $33.33, and 260 x $33.33 = $8,666.67, or $8,667 rounded. The buyer picks up the remaining 100 days of the fiscal year, about $3,333.
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Related Topics & Key Terms
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Related Concepts
The closing process, also called settlement, is the final step in a real estate transaction where documents are signed, funds are disbursed, and title is officially transferred from the seller to the buyer.
Constructive notice is the legal presumption that a person has knowledge of information that is available through public records or visible inspection of the property, regardless of whether they actually knew about it.
A deed is a written legal document that conveys (transfers) ownership of real property from one party to another. It must be delivered to and accepted by the grantee to be effective.
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