a.Compute the following. 1.Total gain. 2.Contract price. 3.Payments received in the year of sale. 4.Recognized gain in the year of sale and the character of such gain. (Hint: Think carefully about the manner in which the property taxes are han-dled before you begin your computations.) b.Same as parts (a)(2) and (3), except that Kay’s basis in the property was $35,000.
Kay, who is not a real estate dealer, sold an apartment house to Polly during the current year (2019). The closing statement for the sale is as follows.
Total selling price $ 190,000
Add: Polly’s share of property taxes (six months) paid by Kay 3,000
Less: Kay’s 8% mortgage assumed by Polly $55,000
Polly’s refundable binder (“earnest money”) paid in 2018 1,000
Polly’s 8% installment note given to Kay 99,000
Kay’s real estate commissions and attorney’s fees 8,000 (163,000)
Cash paid to Kay at closing $ 30,000
Cash due from Polly $30,000 + $8,000 expenses $ 38,000
During 2019, Kay collected $9,000 in principal on the installment note and $2,000 of interest. Kay’s basis in the property was $110,000 [$125,000$15,000(
a.Compute the following.
1.Total gain.
2.Contract price.
3.Payments received in the year of sale.
4.Recognized gain in the year of sale and the character of such gain.
(Hint: Think carefully about the manner in which the property taxes are han-dled before you begin your computations.)
b.Same as parts (a)(2) and (3), except that Kay’s basis in the property was $35,000.
Trending now
This is a popular solution!
Step by step
Solved in 3 steps with 5 images
