Question 28

Seller should pay $577.50 in prorated taxes at closing.

To calculate the prorated taxes the seller should pay at closing, we first determine the daily tax rate based on last year's total taxes of $1,260. Since taxes are paid in arrears and the seller is responsible for the day of closing, we need to calculate the seller's share from January 1 to June 15.

A) 472.5

This option is incorrect. The calculation for this amount does not take into account the full number of days from January 1 to June 15 or miscalculates the daily tax rate, leading to an underestimation of the seller's share of the taxes.

B) 525

This option is also incorrect. While it may reflect a partial calculation, it does not accurately represent the prorated amount due from January 1 through June 15, as it fails to account for the correct number of days or the correct daily tax rate.

C) 577.5

This is the correct answer. To find the prorated amount, we calculate the daily tax rate by dividing the total taxes of $1,260 by 360 days, resulting in $3.50 per day. The number of days from January 1 to June 15 is 166 days. Multiplying 166 days by $3.50 gives $581.00, but since the seller pays for the day of closing, we subtract one day for a total of $577.50.

D) 682.5

This option is incorrect. It overestimates the prorated tax liability by failing to accurately calculate the number of days the seller is responsible for and miscalculates the total amount due based on the daily rate, resulting in an inflated figure.

Conclusion

The correct calculation of prorated taxes reflects the seller's responsibility for the days they own the property up to and including the closing date. Option C accurately accounts for the total days and the proper daily tax rate, while all other options either underestimate or overestimate the amount due. Thus, $577.50 is definitively the correct prorated tax amount payable by the seller at closing.