Humber/Ontario Real Estate Course 4 Exam Practice

How can a buyer ensure the seller's tax obligations are fulfilled in a sale?

1. Obtain seller's affidavit for post-sale tax payment

2. Remit a portion to the national revenue

3. Get a declaration that buyer is a non-resident

4. Credit purchase price for seller's tax liability

5. Include tax provision in sale agreement

6. Retain part of sale proceeds for potential taxes

The correct answer is: Credit purchase price for seller's tax liability

A buyer can ensure the seller's tax obligations are fulfilled in a sale by including a provision in the sale agreement that specifies how the seller's tax liability will be addressed. This can serve as a safeguard for the buyer, ensuring that any tax obligations are clearly stated and understood as part of the transaction terms. By having this provision, the buyer creates a formal commitment for the seller to handle their tax responsibilities, which may include paying any outstanding taxes before or as part of the transaction. This approach provides clarity for both parties and helps prevent potential disputes related to tax liabilities after the sale is completed. Other choices may not provide a robust solution or may not be applicable in all circumstances, but including a tax provision directly addresses the potential risk associated with the seller's obligations.