Unformatted text preview: 14 Apportionment of Real Estate
Taxes Between Buyer & Seller
On 11/1/08 taxpayer Z prepaid $2,000 real estate taxes for
the city fiscal year ending October 31.
On 1/16/09, Z sold his property to A (exclude date of sale).
Z owned the property 76 days (30+31+15), and A owned it
289 days (365-76).
Z may deduct
× $2,000 = $416.44
A may deduct
× $2,000 = $1,583.56
15 The Tax Benefit Rule
Refunds or reimbursements of items deducted in an
earlier year are subject to the “tax benefit rule”
earlier The “Tax Benefit Rule”
Include the refund in income to the extent of the lesser
y Prior year’s deduction or
y Amount by which the prior year’s itemized
deduction exceeded the standard deduction
y Amount of the refund
16 The Tax Benefit Rule Example
In 2008, John paid the following state taxes: $300 in
estimated taxes for 2008, $450 in taxes due on his 2007
return (paid 4/15/08), and had $1,500 taxes withheld.
Assume John had itemized deductions $2,500 greater
than the standard deduction in...
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- Spring '11
- Taxation in the United States