Proration Rules
- 30 day Standard Month
- 360 day standard Year
- Seller is in possession of the property on the day of closing
- In preparing a statement for a closing to be held August 14, a real estate broker determines that the annual real property taxes in the amount of $360 have not been paid. What will the broker put in the buyer’s statement as her entry for real property taxes?
Solution Step 1 — Determine the monthly Tax Amount
Calculation – $360/12 = $30 per month
Solution Step 2 — Determine the Daily Tax Amount
Calculation – $30/30 = $1 per day
Solution Step 3 = Determine the Total Monthly Taxes Owed
Calculation – $30 X 7 (through July) = $210
Solution Step 4 — Determine the Total Monthly Taxes for the month of closing
Calculation – $1 x 14 = $14
Solution Step 5 — Add the total Tax Amount
Calculation – $210 + $14 = $224
Answer: $224 buyer credit (this is the seller’s share of the real property taxes to cover the 7 months and 14 days of the tax year during which he owned the property).
