A house sale is being closed on August 1. The fair market value of the property is $144,000. The assessed value is 50% of fair market value, and the tax levy is 55 mills. What is the buyer's approximate prorated share of the tax?

Rationale

$2,310 represents the buyer's approximate prorated share of the tax.

To calculate the buyer's prorated share of the tax, we first determine the assessed value, which amounts to $72,000 (50% of the fair market value). With a tax levy of 55 mills (or $0.055 per $1), the annual tax is $3,960. Since the sale closes on August 1, the buyer is responsible for approximately 7 months of the yearly tax, leading to a prorated share of $2,310.

A ($1,650) YOUR ANSWER

This amount represents a calculation based on an incorrect prorated period or assessed value. The annual tax should first be established accurately before prorating the buyer's share for the specific months of the year they occupy the property.

B ($2,310) CORRECT

This is the correct answer, calculated by first determining the assessed value as $72,000 (50% of $144,000), leading to an annual tax of $3,960. For a closing on August 1, the buyer is responsible for 7 months of tax, resulting in a prorated tax amount of $2,310.

C ($3,300) YOUR ANSWER

This figure appears to be derived from a misunderstanding of the tax calculation process or the prorated share. It incorrectly assumes a longer period of responsibility or miscalculates the tax based on assessed values.

D ($3,960) YOUR ANSWER

This option reflects the total annual tax liability rather than the prorated share. It does not account for the fact that the buyer would not be responsible for the full year’s tax but only for the portion corresponding to their occupancy period starting from August 1.

Conclusion

In summary, the buyer's prorated share of the property tax is determined through a clear calculation involving the assessed value and tax levy. The assessment of $72,000 leads to an annual tax of $3,960, which, when prorated for the 7 months of occupancy, results in a share of $2,310. This correct understanding of prorating taxes is essential for accurate financial planning in real estate transactions.

A house sale is being closed on August 1. The fair market value of the property is $144,000. The assessed value is 50% of fair market value, and the tax levy is 55 mills. What is the buyer's approximate prorated share of the tax?

$2,310 represents the buyer's approximate prorated share of the tax.

Related Questions

Related Quizzes

How familiar were you with this question?

Report an Issue

Rate this Practice Test