Humber/Ontario Real Estate Course 3 Exam Practice

What tax adjustment is required if a home sold for $254,000 with property taxes of $2,450 already paid, and the closing date is September 14?

1. Buyer; $1,718.36

2. Buyer; $731.64

3. Seller; $724.93

4. Seller; $731.64

The correct answer is: Seller; $731.64

To determine the correct tax adjustment, one must first calculate the tax allocation based on the property tax and the time frame involved. The property taxes for the year total $2,450. Since the closing date is September 14, we need to calculate how many days of the year have passed by that date. Up to September 14, there are 257 days out of a possible 365 days in the year. Next, we calculate the daily property tax rate by dividing the total taxes by the total number of days in the year: \[ \text{Daily tax rate} = \frac{2,450}{365} \approx 6.71 \] Now, we can find out how much of the annual property tax has been incurred by the time of closing: \[ \text{Accrued taxes} = 6.71 \times 257 \approx 1,724.47 \] The seller has paid the full year's taxes already, which means they owe the buyer for the days post-closing until the end of the tax year (December 31). The buyer will take on the responsibility for these portions of the property taxes. Calculating how many days of tax are remaining after the