Humber/Ontario Real Estate Course 2 Exam Practice

If the total property taxes for a fiscal year are $6,000 and the buyer purchases the house halfway through the year on July 1st, how much should the buyer compensate the seller for prepaid property taxes?

1. $2,000

2. $3,000

3. $4,000

4. $1,500

5. $3,500

6. $2,500

The correct answer is: $3,000

When the buyer purchases the house halfway through the year on July 1st, they will only be responsible for the property taxes for the remaining half of the fiscal year. Since the total property taxes for the entire year are $6,000, the property taxes for half a year would be $6,000 divided by 2, which equals $3,000. Therefore, the buyer should compensate the seller for prepaid property taxes in the amount of $3,000. The other options are incorrect because they do not reflect the correct calculation for the prepaid property taxes for half of the fiscal year.