Sally owns real property for which the annual property taxes are $9,000. She sells the property to Kate on March 9, 2021, for $550,000 Kate pays the real property taxes for the entire year on October 1, 2021. Assume a 365-day year. Round any division to four decimal places. Round your final answers to the nearest dollar.
Sally owns real property for which the annual property taxes are $9,000. She sells the property to Kate on March 9, 2021, for $550,000 Kate pays the real property taxes for the entire year on October 1, 2021. Assume a 365-day year. Round any division to four decimal places. Round your final answers to the nearest dollar.
Chapter3: Income Sources
Section: Chapter Questions
Problem 86P
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Transcribed Image Text:Sally owns real property for which the annual property taxes are $9,000. She sells the property to Kate on March 9, 2021, for $550,000.
Kate pays the real property taxes for the entire year on October 1, 2021.
Assume a 365-day year. Round any division to four decimal places. Round your final answers to the nearest dollar.
a. How much of the property taxes can be deducted by Sally and how much by Kate?
Sally can deduct $
1,652
and Kate can deduct $
7,348
of the property taxes.
b. What effect does the property tax apportionment have on Kate's adjusted basis in the property?
Kate's adjusted basis for the property is increased
by the $
1,652
she paid that is apportioned to Sally.
c. What effect does the apportionment have on Sally's amount realized from the sale?
Sally paid none of the real property taxes and is
permitted to deduct the apportioned share of $
542,652
Her amount
realized is increased
by this amount.
d. How would the answers in parts (b) and (c) differ if Sally paid the taxes?
If Sally paid the taxes, Sally's amount realized would be $
Kate's adjusted basis would be $
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ISBN:
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Author:
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Publisher:
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