Final answer:
Property tax proration involves calculating the daily tax rate and then multiplying it by the number of days each party owned the property. In this case, when the property is sold on November 1, the buyer would reimburse the seller for the taxes accrued from November 1 to the end of the tax period.
Step-by-step explanation:
The student is asking about proration of property taxes in the case of a real estate transaction. Proration refers to the allocation of property tax liability between the buyer and the seller based on the proportion of the year each owns the property.
As the property tax bill of $1,200 is for the previous six months and is due on January 1, we need to determine how much of the tax each party is responsible for.
To calculate the proration, we first determine the daily tax rate, then multiply this by the number of days each party owned the property during the taxing period. The real estate taxes cover six months equating to 180 or 181 days depending on whether it includes February in a leap year.
For our calculation, we will assume a common year with 180 days. This gives us a daily tax rate of $1,200 / 180 = $6.67.
The seller owns the property from January 1 to October 31, which is 304 days in a non-leap year. The buyer owns the property for the remaining days of the year from November 1 to December 31, which is 61 days. Therefore, the seller's prorated tax is 304 days * $6.67 = $2,027.28, and the buyer's prorated tax is 61 days * $6.67 = $406.87.
Since the tax bill is paid in advance, the buyer will need to reimburse the seller for the portion of the tax period when the buyer owns the property, which amounts to $406.87.