Question

A property's real estate taxes are $1,400, and this amount is paid in arrears. The closing was on August 7th (day 219 of the year). How much did the seller have to pay the buyer for his/her share of the taxes? Assume the taxes remain the same, the seller owns the day of closing, and use the 365-day method.

Answer 1

$836.16

Step-by-step explanation:

The seller was the owner of the property until August 6th, which represents the first 218 days of the year. That means that the seller is responsible for paying (218/365) x $1,400 = 0.5972 x 365 = $836.16

The term paid in arrears means that the taxes are paid at the end of the period. In this case the taxes have to be paid by the end of the year.