A tax assessor determined that a commercial building with a 3.6% mortgage has a market value of $400,000. If the assessed value is 60% of market value and the tax rate is 63 1/8 mills, what is the annual tax?

Rationale

The annual tax is $15,150.00.

To determine the annual tax for the commercial building, we first calculate the assessed value, which is 60% of the market value of $400,000. This gives us an assessed value of $240,000. Then, we convert the tax rate of 63 1/8 mills into a decimal (0.063125) and multiply this by the assessed value to find the annual tax, resulting in $15,150.00.

A (5,306.60) YOUR ANSWER

This choice is incorrect as it likely results from miscalculating either the assessed value or the application of the tax rate. The assessed value of $240,000 multiplied by a tax rate of 0.063125 yields a much higher tax amount than $5,306.60.

B (8,837.60) YOUR ANSWER

This option is also incorrect. Similar to the previous choice, it suggests an incorrect multiplication of the assessed value with the tax rate. The calculations performed do not align with the derived tax amount from the correct assessed value and tax rate.

C (15,150.00) CORRECT

This is the correct answer. By calculating the assessed value at 60% of $400,000, we arrive at $240,000. Multiplying this by the tax rate of 0.063125 gives the correct annual tax amount of $15,150.00.

D (25,250.00) YOUR ANSWER

This choice is too high and reflects a potential error in either the assessed value or the tax rate application. The calculation for the annual tax should yield a significantly lower amount than $25,250.00 based on the given values.

Conclusion

The annual tax for the commercial building is calculated by finding 60% of the market value to determine the assessed value, followed by applying the tax rate. In this case, the assessed value of $240,000 results in an annual tax of $15,150.00, validating that option C is the correct choice. Other options do not accurately reflect the calculations based on the given market value and tax rate.

A tax assessor determined that a commercial building with a 3.6% mortgage has a market value of $400,000. If the assessed value is 60% of market value and the tax rate is 63 1/8 mills, what is the annual tax?

The annual tax is $15,150.00.

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