The correct answer is B, Real estate taxes. A proration allocates an expense or income item between buyer and seller according to the portion of the relevant period during which each party owns or possesses the property.

Property taxes are a classic example. If the seller has already paid taxes covering a period extending beyond closing, the buyer may reimburse the seller for the buyer ' s own ership period. Conversely, if taxes have accrued but remain unpaid, the seller may owe the buyer an appropriate credit at closing.

The specific calculation depends on the closing date, contractual convention, municipal tax period, and whether the buyer or seller is treated as owning the closing date.

Other common prorated items can include prepaid rents, condominium charges, fuel, water or sewer charges, and certain operating expenses depending on the transaction.

Personal debts unrelated to the property are not prorated merely because a real-estate closing occurs.

Study Guide Reference: Closing and Settlement/Real Estate Calculations — Tax Prorations and Closing Adjustments.