Question

On April 1, 2018, Paul sold a house to Amy. The property tax on the house, which is based on a calendar year, was due September 1, 2018. Amy paid the full amount of property tax of $2,500. Calculate both Paul and Amy’s allowable deductions for the property tax. Assume a 365-day year. (Do not round your intermediate calculations. Round your final answers to two decimal places.)

Answer 1

Paul = $616.44

Amy = $1883.56

Step-by-step explanation:

Given

Full Amount = $2,500

There are 90 days between January 1, 2018 and April.

Calculating the amount generated by Paul;

Paul = $2,500 * 90/365

Paul = $616.4383561643835

Paul = $616.44 ---- Approximated

There are (365-90)days left after April 2, 2018 till December 31, 2018

Calculating Amount Generated by Amy

Amy = $2,500 * (365-90)/365

Amy = $2,500 * 275/365

Amy = $1883.561643835616

Amy = $1883.56 --- Approximated

That is the total allowable deduction for Paul and Amy