Humber/Ontario Real Estate Course 4 Exam Practice

If the transaction closing date is May 14 and the year's taxes of $2,200 are unpaid, who gets credit and for how much on the statement of adjustments?

1. Buyer; $648

2. Buyer; $808

3. Seller; $648

4. Seller; $808

5. Buyer; $802

6. Seller; $802

The correct answer is: Buyer; $802

In a real estate transaction, the closing date is significant when calculating the allocation of property taxes between the buyer and seller. Property taxes are typically prorated based on the number of days each party owns the property during the tax year. In this situation, the total annual taxes are $2,200. To determine the daily tax rate, you divide the total by the number of days in the year (usually 365). This gives a daily tax rate of approximately $6.03: $2,200 ÷ 365 ≈ $6.03 per day. From January 1 to the closing date of May 14, there are 134 days (31 days in January + 29 days in February since it's a leap year + 31 days in March + 30 days in April + 14 days in May). Thus, the seller is responsible for the tax amount covering these 134 days: $6.03 × 134 days = $808.02, which can be rounded to $808. On the statement of adjustments, since the taxes are unpaid up to the closing date, the seller would receive a credit of $808 because they owe this amount in property taxes, and the buyer is assumed to be paying for the