Humber/Ontario Real Estate Course 3 Exam Practice

What credit would appear on the statement of adjustments for a property with an October 1st closing date if the seller has paid annual taxes of $2,400?

1. Buyer; $598.36

2. Buyer; $1,800.55

3. Seller; $598.36

4. Seller; $604.93

The correct answer is: Seller; $604.93

The correct answer reflects the pro-rated property taxes that have been paid by the seller, which are credited accordingly on the statement of adjustments during the closing of the property. In this case, since the seller has paid the annual property taxes of $2,400 for the year, and the property is closing on October 1st, a calculation is required to determine how much of that amount should be credited back to the seller for the period they will not own the property. The annual tax amount would be divided by 12 months to get the monthly tax amount, and then calculated for the months that the seller will not own the property after closing. For a closing date of October 1st: - The seller has owned the property for 9 months from January to September. Therefore, they are entitled to the remaining 3 months' worth of tax credit post-closing. - The monthly tax amount is $2,400 divided by 12, which equals $200. - The total amount for the last three months (October, November, and December) is $200 multiplied by 3, resulting in $600. Therefore, a credit appearing on the statement of adjustments for this amount would be $600, indicating this amount as a debit to