38. The closing date for a house is August 16. The market value of the property is $160,000. The assessed value is 50% of market value, and the tax levy is $55 per $1,000 of assessed value. The taxes have not been paid for the year. Using a 365-day year, what is the amount of the prorated taxes on the closing statement?
Answer: A
The prorated taxes on the closing statement amount to $1,651.
To calculate the prorated taxes, we first determine the assessed value, which is 50% of the market value of $160,000, yielding an assessed value of $80,000. With a tax levy of $55 per $1,000 of assessed value, the annual tax amounts to $4,400. Since the closing date is August 16, there are 228 days remaining in the year, leading to prorated taxes of $1,651.
A) 1,651
This option is correct as it accurately reflects the prorated tax calculation. The assessed value is $80,000, leading to annual taxes of $4,400. The prorated amount for 228 days out of 365 is calculated as ($4,400 / 365) * 228, resulting in $1,651.
B) 2,748
This option is incorrect. While it may represent a plausible figure, it does not align with the calculated prorated taxes based on the assessed value and tax levy. The calculation steps leading to this figure do not adhere to the correct methodology for prorating based on the closing date.
C) 4,400
This option is incorrect as it represents the total annual taxes based on the assessed value, not the prorated amount. It fails to account for the fact that the closing date is mid-year, and thus only a portion of the annual taxes would apply.
D) 5,498
This option is also incorrect. It suggests a figure that exceeds the total annual tax liability and does not reflect any logical prorated tax calculation. The amount does not correspond to the assessed value or tax levy provided in the context.
Conclusion
The correct answer, $1,651, is derived from a precise calculation of the prorated taxes based on the assessed value and the remaining days in the year. All other options fail either by miscalculating the prorated amount or by misrepresenting the annual tax total, underscoring the importance of accurate prorating in real estate transactions.