You are the buyer and are getting ready to close on your new home. The closing d

Question

You are the buyer and are getting ready to close on your new home. The closing date is scheduled for March 18. The tax bill is due to arrive after closing and you will be responsible for paying that bill in full post-closing. After discussions with the seller, you have agreed that the date of closing will be yours. Based on last year's taxes and the historical rate of growth, you estimate the tax bill will be $8,700. Assuming a 365-day year, determine how the tax bill will be prorated. In the box below, enter the prorated amount of taxes that the seller will pay at closing to cover her share of the tax bill. (hint: start by counting how many days each party is responsible for paying this calendar-year expense; and remember the day of sale belongs to the buyer)

Explanation / Answer

Tax amount = $8700

Seller proportionate days of the year = (31+28+ 17) = 76 days

Sellers share = 8700*76/365 = $1811.51

Buyers share of days = (365-76) = 289

Buyers share of tax = 8700*289/365 = $6888.49

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