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Apportionment typically describes the allocation of expenses between 2 or more parties.
These arrangements can be between buyer and seller or even among partners.
Common expenses consider for apportionment include:
- Lease related expenses
The method of allocation is usually agreed beforehand or prorated.
For example, at the closing process of a property transaction, property taxes paid in arrears need to be settled. The amount due is then apportioned between buyer and seller.
Apportionment can also be used to describe geographic localization of revenue sources for tax planning.
For example one-third of a company’s revenue originate from another state and that portion should be taxed according to that state’s tax regulations.
A third way the term apportionment is used is when a house is partitioned into more than one parcel by tenants in common.
These situations can arise when there are more than one owner and one party is insistent on selling but another refuse to do so. By partitioning, the party who wish to sell will be able to sell his segment of the property.