A property closes on September 1. Annual taxes of $7,200 are unpaid (seller owes through August 31). Using a 360-day year (30-day months), how much is the seller's prorated tax debit at closing?
Correct Answer
B) $4,800
Step 1: Daily rate = $7,200 ÷ 360 = $20. Step 2: Seller owns Jan 1 through Aug 31 = 8 months × 30 = 240 days. Step 3: Tax debit to seller = 240 × $20 = $4,800.
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Related Topics & Key Terms
Key Terms:
Related Concepts
Annual interest is the total amount of interest charged on a loan or investment over a year.
Area calculation involves determining the square footage or acreage of a property using geometric formulas. Key conversions: 1 acre = 43,560 square feet, 1 mile = 5,280 feet, 1 section = 640 acres.
Daily rate calculation involves determining the cost or income per day by dividing the total amount by the number of days in the period (usually a year or a month). This is a fundamental step in proration.
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