Answered: TPW, a calendar year taxpayer, sold…

ENGR.ECONOMIC ANALYSIS

14th Edition

ISBN:9780190931919

Author:NEWNAN

Publisher:NEWNAN

Chapter1: Making Economics Decisions

Section: Chapter Questions

Problem 1QTC

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TPW, a calendar year taxpayer, sold land with a $535,000 tax basis for $750,000 in February. The purchaser paid $75,000 cash at closing and gave PW an interest-bearing note for the $675,000 remaining price. In August, PW received a $55,950 payment from the purchaser consisting of a $33,750 principal payment and a $22,200 interest payment. Required: a. Compute gain realized on the sale. b. Compute gain recognized in the year of sale if TPW elects not to use the installment sale method of accounting. Compute PW's tax basis in the note at the end of the year. c. Compute gain recognized in the year of sale if TPW uses the installment sale method of accounting. Compute PW's tax basis in the note at the end of the year.

TPW, a calendar year taxpayer, sold land with a $535,000 tax basis for $750,000 in February. The purchaser paid $75,000 cash at closing and gave TPW an interest-bearing note for the $675,000 remaining price. In
August, TPW received a $55,950 payment from the purchaser consisting of a $33,750 principal payment and a $22,200 interest payment.
Required:
a. Compute gain realized on the sale.
b. Compute gain recognized in the year of sale if TPW elects not to use the installment sale method of accounting. Compute TPW's tax basis in the note at the end of the year.
c. Compute gain recognized in the year of sale if TPW uses the installment sale method of accounting. Compute TPW's tax basis in the note at the end of the year.
Complete this question by entering your answers in the tabs below.
Required A Required B Required C
Compute gain realized on the sale.
Gain realized on sale
< Required A
Required B >
TPW, a calendar year taxpayer, sold land with a $535,000 tax basis for $750,000 in February. The purchaser paid $75,000 cash at closing and gave TPW an interest-bearing note for the $675,000 remaining price. In
August, TPW received a $55,950 payment from the purchaser consisting of a $33,750 principal payment and a $22,200 interest payment.
Required:
a. Compute gain realized on the sale.
b. Compute gain recognized in the year of sale if TPW elects not to use the installment sale method of accounting. Compute TPW's tax basis in the note at the end of the year.
c. Compute gain recognized in the year of sale if TPW uses the installment sale method of accounting. Compute TPW's tax basis in the note at the end of the year.
Complete this question by entering your answers in the tabs below.
Required A
Required B
Required C
Compute gain recognized in the year of sale if TPW elects not to use the installment sale method of accounting. Compute
TPW's tax basis in the note at the end of the year.
Amount
Gain recognized
TPW's tax basis in note
< Required A
Required C >
TPW, a calendar year taxpayer, sold land with a $535,000 tax basis for $750,000 in February. The purchaser paid $75,000 cash at closing and gave TPW an interest-bearing note for the $675,000 remaining price. In
August, TPW received a $55,950 payment from the purchaser consisting of a $33,750 principal payment and a $22,200 interest payment.
Required:
a. Compute gain realized on the sale.
b. Compute gain recognized in the year of sale if TPW elects not to use the installment sale method of accounting. Compute TPW's tax basis in the note at the end of the year.
c. Compute gain recognized in the year of sale if TPW uses the installment sale method of accounting. Compute TPW's tax basis in the note at the end of the year.
Complete this question by entering your answers in the tabs below.
Required A Required B
Required C
Compute gain recognized in the year of sale if TPW uses the installment sale method of accounting. Compute TPW's tax basis
in the note at the end of the year. (Round gross profit percentage to 2 decimal places, and other intermediate calculations to
the nearest whole dollar amount.)
Amount
Gain recognized
TPW's tax basis in note
< Required B
Required C >

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