In Lawrence County, the real property tax year is the calendar year.The real property tax becomes a personal liability of the owner of real property on January 1 in the current real property tax year (assume that this year is not a leap year).The tax is payable on June 1.On May 1, Reggie sells his house to Dana for $350,000.On June 1, Dana pays the entire real estate tax of $7,950 for the year ending December 31.Assuming that Reggie itemizes his deductions and the $10,000 limit on state and local taxes does not apply, how much of the property taxes may Reggie deduct?
A)$0
B)$2,614
C)$2,625
D)$7,950
E)None of these

Question

Quizplus · Accepted Answer

Reggie may deduct the portion of the property taxes that he paid during the time he owned the property, which is from January 1 to May 1. This is approximately 4/12 or 1/3 of the total property tax for the year, which is $7,950. Therefore, Reggie may deduct $7,950 x 1/3 = $2,650. However, the IRS only allows deductions for property taxes actually paid, so Reggie may only deduct the amount he paid, which is $2,614 (rounded to the nearest dollar).

In Lawrence County, the Real Property Tax Year Is the Calendar