On May 1 of the current year, Tara sells a building to Janet for $500,000. Tara’s basis in the building is $300,000. The county in which the building is located has a real property tax year that ends on June 30. The taxes are payable by September 1 of that year. On September 1, Janet pays the annual property taxes of $6,000. Both Tara and Janet are calendar-year, cash method taxpayers. The closing agreement does not separately account for the property taxes. Disregard any leap year.
a. What amount of real property taxes may Janet deduct in the current year?
b. What amount of real property taxes may Tara deduct in the current year?
c. If no apportionment on the real property taxes is made in the sales agreement, what is Tara’s total selling price of the building? Janet’s basis for the building?