California Real Estate Practice Exam

Sellers sold their residence and closed escrow on Oct. 15. Taxes on the property were $1,400 per year and had not been paid since payment of the last installment of the preceding tax year. What will their tax proration for this escrow be?

1. Credit $408

2. Credit $467

3. Debit $408

4. Debit $467

The correct answer is: Credit $408

To determine the tax proration for the escrow, first, calculate the daily property tax amount based on the annual tax of $1,400. Divide the annual tax by 365 days to get the daily tax rate: $1,400 / 365 = approximately $3.84 per day. Next, identify how many days the seller owned the property during the current tax year. Since the property was sold and escrow closed on October 15, we consider the time from January 1 to October 15. This totals 288 days (31 days in January, 28 days in February assuming it's not a leap year, 31 days in March, 30 days in April, 31 days in May, 30 days in June, 31 days in July, 31 days in August, 30 days in September, and 15 days in October). Now, multiply the number of days (288) by the daily tax rate ($3.84): 288 days × $3.84 ≈ $1,107.12. This represents the total tax liability for the period the seller owned the property. Since the total annual tax amount is $1,400, the buyer is responsible for the remaining taxes from October 16