Exercise AlgorithmicLO
Sally owns real property for which the annual property taxes are $ She sells the property to Kate on April for $ Kate
pays the real property taxes for the entire year on October
Assume a 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 $
and Kate can deduct $
of the property taxes.
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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 $
she paid that is apportioned to Sally.
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c What effect does the apportionment have on Sally's amount realized from the sale?
Sally paid none of the real property taxes and
permitted to deduct the apportioned share of $
Her amount
realized is
by this amount.
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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 $
