A house sells for $89,500; the buyer pays $50,000 in cash and gives the seller a mortgage for the balance. If the state transfer tax is 1% of the sale price, how much tax is due?

A house sells for $89,500; the buyer pays $50,000 in cash and gives the seller a mortgage for the balance. If the state transfer tax is 1% of the sale price, how much tax is due?

• A. $895
• B. $900
• C. $899
• D. $895.50

Answer: (A)

Transfer taxes are based on the sale price, not on how the purchase is financed. So multiply the sale price by 1%: 89,500 × 0.01 = 895. The down payment and the mortgage amount don’t change the tax base in this scenario, so the tax due is 895.

Transfer taxes are based on the sale price, not on how the purchase is financed. So multiply the sale price by 1%: 89,500 × 0.01 = 895. The down payment and the mortgage amount don’t change the tax base in this scenario, so the tax due is 895.