Question: On Jan 15, a seller paid $960 in annual property tax for the current calendar year. A buyer is purchasing the house with the closing set up for March 1. What will be the seller's credit for the property tax already paid if the buyer pays for the day of closing. Use 360-day year and 30-day month. The answer is $800.
Let's do the math:
Step 1: The annual property tax paid was $960 / 360 days (the calendar year the question gave you)= $2.67 / day (rounded)
Step 2: January 1st - February “30th” = 60 days = seller’s ownership and therefore what they "owe" for property taxes
Step 3: $2.67 x 60 days (seller ownership) = $160.20
Step 4: $960 total bill already paid - $160.20 seller’s ownership = $799.80 owed to seller as a credit (round up to $800).
Question: On Feb. 1, a seller paid $1,140 in annual property tax for the current calendar year. He sold the house with the closing set for April 1. What will be the seller's credit for the property taxes already paid if the buyer pays for the day of closing. Use a 360 day year and 30-day month. The answer states that it is $288.
NOTE: There's a drafting error in this question (a mistake); correct answer is marked as 91 days, which is the seller’s term of ownership (instead of their credit), if the seller paid the day of closing. Therefore the correct math would look like this:
Step 1: The annual property tax paid was $1,140 / 360 days (the calendar year the question gave you)= $3.17 / day (rounded)
Step 2: 90 days (sellers ownership) x $3.17 / day = $285 (rounded)
*Correct answer should be: $1,140 - $285 = $855 (seller’s pre paid taxes for the term that they do not own the property)