In: Accounting
abitha sells real estate on March 2 of the current year for $377,200. The buyer, Ramona, pays the real estate taxes of $18,860 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 a 365-day year. a. Determine the real estate taxes apportioned to and deductible by the seller, Tabitha, and the amount of taxes deductible by Ramona. Tabitha: $fill in the blank 1 Ramona: $fill in the blank 2 b. Calculate Ramona's basis in the property and the amount realized by Tabitha from the sale. Tabitha: $fill in the blank 3 Ramona: $
Assumptions Taken:
a. March 2 is excluded date for calculation.
b. Solutions is based on apportionment of taxes.
c. abitha = Tabitha (as question once mentioned it abitha and on the other occassion mentions it as Tabitha)
Solutions:
Real EstateTax Apportioned to seller
=Total Real EstateTax * Number of days Before transfer / Number of days in a year
1. If the taxes weren't apportioned as part of closing, than none of the taxes are apportioned to Tabitha, if they were, Tabitha is apportioned 60 days [(31 days january+28 days february + 1 day march) / 365] of the real estate taxes
= (60 / 365 ) * 18,860
= $3100
2. If they were apportioned at closing, Ramona can deduct the remaining $15,760 ($18,860 - $3,100), or
= (305 / 365) * 18860
= $15,760
3. Ramona cannot deduct any of the real estate taxes and they are added to the basis (Pub 551). This would make Ramona's basis $380,300 ($377,200 + $3,100).
Basis in property = Sale price of Real Estate + Amount of real estate tax Apportioned to seller
4. Amount Realized by seller = Buyer's basis in property
Tabitha realizes $380,300.
1. $3,100
2. $15,760
3. $380,300
4. $380,300