On July 1 of year 1, Elaine purchased a new home for $795,000. At the time...

On July 1 of year 1, Elaine purchased a new home for $795,000. At the time of the purchase, it was estimated that the property tax bill on the home for the year would be $15,900 ($795,000 × 2%). On the settlement statement, Elaine was charged $7,950 for the year in property taxes and the seller was charged $7,950. On December 31, year 1, Elaine discovered that the real property taxes on the home for the year were actually $16,900. Elaine wrote a $16,900 check to the local government to pay the taxes for that calendar year. (Elaine was liable for the taxes because she owned the property when they became due.) What amount of real property taxes is Elaine allowed to deduct for year 1? (Assume not married filing separately.)

Multiple Choice $0.

$7,950.

$8,450.

$8,950.

$16,900.

Expert Solution

Answer is $8,450

Actual taxes paid is $7,950 plus 50% of differential tax on ( $16,900- $15,900)

So total is $7,950 + $500 = $ 8,450 - Elaine is allowed to deduct for year 1

ekkarill92 answered 2 years ago

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