A property has annual property taxes of $3,600. The seller paid taxes through December 31, but the sale closes on October 1. How much does the seller owe the buyer as a proration?
Question & Answer
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$900
$2,700
This option incorrectly calculates the buyer's share of taxes ($2,700 = $300 × 9 months) rather than the seller's credit for prepaid taxes. It represents confusion about who should receive the proration credit.
$0
This option suggests no proration is needed, which is incorrect because the seller has prepaid taxes for months they won't own the property. This represents a fundamental misunderstanding of proration purposes.
$300
This option incorrectly calculates only one month's worth of taxes ($300) instead of the three months (October, November, December) the seller has prepaid but won't use. It represents a calculation error.
Why is this correct?
The seller has prepaid for Oct-Dec (3 months). Monthly tax: $3,600 ÷ 12 = $300. The seller is owed $300 × 3 = $900 as a credit from the buyer.
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