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On January 15, a seller paid $960 in annual property tax for the current calendar year. A buyer is purchasing the house with the closing set for March 1. What will be the seller's credit for the property taxes already paid if the buyer pays for the day of closing? Use a 360-day year and a 30-day month.

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Answer:

$ 840

Step-by-step explanation:

The seller pays annual property tax $ 960 on January 15. So, his tax per month is $960/12 = $80/month. For a 30 day month,is tax per day is $80/30 $ 8/3 = $ 2²/₃. We have 45 days from January 15 to March 1. (Feb -1 month and 15 days from 16th to 30th January ).

So, the tax paid for Feb = $80/ month × 1 month = $ 80.

Tax paid for the 15 days before March 1 = $ 8/3 per day × 15 days = $ 40. So the total tax paid from January 15 to March 1 = $ 80 + $ 40 = $120 which is the tax used up by seller.

So, seller's credit = total annual tax - tax used up by seller = $ 960 - $ 120 = $ 840

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