Question

Grace sold her property. She had already paid the property taxes for the year. The closing date was October 1; however, the contract allowed Grace to continue to occupy the property until the end of the year. How was the tax proration treated on the closing statement?1. Grace was credited for three months taxes.2. The buyer was credited with three months taxes.3. Grace was credited with nine months taxes.4. There was no tax proration at closing since Grace lived on the property for the entire year.

Answer 1

Answer:

1. Grace was credited for three months taxes.

Explanation:

We need to understand proration. The buyer needs to pay for the taxes the date the property is owed to him, and the seller needs to pay for the taxes till he is having the property. Now he has paid for a year, and the year ends on October 1st. However, he is going to owe the property until Jan 1st. And hence, Grace is credited with the 3 months taxes.