New Jersey Real Estate Exam Practice Question
The closing date for a house is August 16. The market value of the property is $160,000. The assessed value is 50% of market value, and the tax levy is $55 per $1,000 of assessed value. The taxes have not been paid for the year. Using a 365-day year, what is the amount of the prorated taxes on the closing statement?
Correct Answer: A
Rationale: To determine the prorated taxes, first calculate the assessed value, which is 50% of the market value: $160,000 x 0.50 = $80,000. The tax levy is $55 per $1,000 of assessed value, leading to annual taxes of ($80,000 / $1,000) x $55 = $4,400. Since the closing date is August 16, the homeowner is responsible for taxes from January 1 to August 16, totaling 229 days. The daily tax amount is $4,400 / 365 = $12.05. Therefore, prorated taxes are $12.05 x 229 = $2,760.95, which rounds to $2,761.
Option A ($1,651) is incorrect as it underestimates the prorated amount.
Option B ($2,748) is close but slightly low due to rounding discrepancies.
Option C ($4,400) represents the full annual tax, not prorated.
Option D ($5,498) is incorrect as it overestimates the tax liability.
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