Last September I paid $4,000 in tax on a property I just sold. The buyer gave me $2,300 for the prepaid tax.
I presume on my 1040 I claim $1,700 in tax and ignore everything else? If not, then what is correct?
I've seen the following scenario where I live: The seller pays the buyer $1700, and the closing statement shows the credit of $1700 from seller to buyer, and the seller as the owner of the property pays the full $4000. However, I think the seller should only deduct $2300 on their Schedule A, and the buyer should deduct $1700.
It looks like in your case the seller pays the full $4000, and at closing the buyer paid the seller $2300. Similar, but different.
That sounds right as it is similar to accrued interest. But that's just my guess.
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