Tabitha sells real estate on March 2 of the current year for $350,800. The buyer, Ramona, pays the real estate taxes of $17,540 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: $
Ramona: $

b. Calculate Ramona's basis in the property and the amount realized by Tabitha from the sale.
Tabitha: $
Ramona: $

Solutions

Expert Solution

Given Tabitha sells real estate on march 2 for $350,800. The estate taxes paid by Ramona is $17,540

Real Estate Taxes

Tabitha is liable to pay the taxes till March 2,(31+28+2 = 61 days) so the amout of taxes for tabitha is as folows if they are apportioned between them

Tabitha'share = $17,540 *(61/365) = $2,931

Ramona's share = $17,540 - $2,931 = $14,609

Ramona's basis in the property:

If the taxes are apportioned , the basis in the property for Ramona is $350,800. if it is not , then the taxes are added to the basis $368,340 ($350,800 + $17,540)

Amount Realized by Tabitha

If the taxes are apportioned, the amount realized by tabitha is $347,869 ($350,800 - $2,931)

If it is not, the amount realized is $350,800

ekkarill92 answered 1 year ago

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