Question

Tabitha sells real estate on March 2 of the current year for $358,000. The buyer, Ramona, pays the real estate taxes of $17,900 for the calendar year, which is the real estate property tax year.

Round any division to four decimal places and use in subsequent calculations. Round your final answers to the nearest dollar. Assume 365-day year.

$________ of the real estate taxes is apportioned to and is deductible by the seller, Tabitha, and $_________ of the taxes is deductible by Ramona. Ramona's basis is in the property is $________ and the amount realized by Tabitha from the sale is $________.

Answer 1

Real estate taxes is deductible for pro rated share of property ownership

Property owned by seller 60 days(Jan 31 + Feb 28 + mar 1)

Property owned by buyer 305 days

Seller share of real estate taxes = 17900 x 60/365 = $2,942

Buyer share of real estate taxes = 17900-2942 = $14,958

$2,942 of the real estate taxes is apportioned to and is deductible by the seller, Tabitha, and $14,958 of the taxes is deductible by Ramona. Ramona's basis is in the property is $360,942 and the amount realized by Tabitha from the sale is $360,942.

Any amount of taxes that is paid by buyer for seller behalf is added to the basis of property and amount realized by seller is increased by same amount.