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Tabitha sells real estate on March 2 of the current year for $311,200. The buyer

ID: 2559285 • Letter: T

Question

Tabitha sells real estate on March 2 of the current year for $311,200. The buyer, Ramona, pays the real estate taxes of $15,560 for the calendar year, which is the real estate property tax year.

Round any division to four decimal places and use in subsequent calculations. Round your final answers to the nearest dollar. Assume a 365-day year.

$ of the real estate taxes is apportioned to and is deductible by the seller, Tabitha, and $ of the taxes is deductible by Ramona. Ramona's basis is in the property is $ and the amount realized by Tabitha from the sale is
$.

Explanation / Answer

Sale Price = $311,200

Date of Sale 2 March

Real Estate Taxes Paid For the Year - $15,560

Taxes to be apportioned to Seller is as under

No of Days for which property Held * Total Taxes / No of days in a year

61*15,560/365 = $2,600

(No of days for which property held by seller = 31 days of January + 28 days of February +2 days of March =61 Days)

Taxes deductible by Buyer Ramona = $15,560 - $2,600 = $12,960

Buyer Ramona’s Basis in the Property = $311,200(Purchase price) + $2,600(Property taxes of seller incurred by buyer) = $313,800

Amount Realized by Tabitha from sale of property

Sale Price of Property                                =$311,200

Add: Property Taxes incurred by Buyer =     $2,600

Total Sale Consideration Received         =$313,800

Assumption: - It has been assumed that $2,600 i.e. the portion of property tax apportioned and deductible by seller Tabitha has been incurred by the buyer.