Oregon 30-Hour Real Estate Law Practice Test

How would you calculate a transfer tax of .04% on a $350,000 property?

1. Multiply 350,000 by 0.0004

2. Add 350,000 and 0.0004

3. Multiply 350,000 by 0.04

4. Divide 350,000 by 0.04

The correct answer is: Multiply 350,000 by 0.0004

To calculate a transfer tax of 0.04% on a $350,000 property, the correct method is to multiply the property value by the decimal equivalent of the tax rate. The percentage has to be converted to a decimal for accurate calculation. In this case, 0.04% is equivalent to 0.0004 when expressed as a decimal. Thus, multiplying the property value of $350,000 by the decimal 0.0004 allows you to find the amount of transfer tax owed. By performing the calculation: $350,000 × 0.0004 = $140, you arrive at the transfer tax amount of $140. This method is standard for calculating taxes based on a percentage of a property value, making option A the correct choice. Other methods listed would not yield the correct tax amount. Adding the tax rate to the property value does not express the financial relationship needed for tax calculation. Multiplying by 0.04 disregards the fact that we're looking for 0.04%, and dividing by 0.04 does not apply in this scenario – you need to find a percentage of the total, not a division of the total.