Verlin sells a commercial building and receives $50,000 in cash and a note for $50,000 at 10% interest. Verlin's adjusted basis in the building on the date of sales is $40,000, and he collects only the $50,000 down payment in the year of sale. a. If Verlin elects to recognize the total gain on the property in the year of sale, calculate the taxable gain. b. If Verlin uses the installment method, calculate the taxable gain he must report for the year of the sale. c. If Verlin collects $10,000 (not including interest) of the note principal in the year following the year of the sale, calculate the amount of income recognized under the installment sale method.
Verlin sells a commercial building and receives $50,000 in cash and a note for $50,000 at 10% interest. Verlin's adjusted basis in the building on the date of sales is $40,000, and he collects only the $50,000 down payment in the year of sale. a. If Verlin elects to recognize the total gain on the property in the year of sale, calculate the taxable gain. b. If Verlin uses the installment method, calculate the taxable gain he must report for the year of the sale. c. If Verlin collects $10,000 (not including interest) of the note principal in the year following the year of the sale, calculate the amount of income recognized under the installment sale method.
SWFT Essntl Tax Individ/Bus Entities 2020
23rd Edition
ISBN:9780357391266
Author:Nellen
Publisher:Nellen
Chapter7: Property Transactions: Basis, Gain And Loss, And Nontaxable Exchanges
Section: Chapter Questions
Problem 9P
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Transcribed Image Text:Verlin sells a commercial building and receives $50,000 in cash
and a note for $50,000 at 10% interest. Verlin's adjusted basis
in the building on the date of sales is $40,000, and he collects
only the $50,000 down payment in the year of sale.
a. If Verlin elects to recognize the total gain on the property in
the year of sale, calculate the taxable gain.
b. If Verlin uses the installment method, calculate the taxable
gain he must report for the year of the sale.
c. If Verlin collects $10,000 (not including interest) of the note
principal in the year following the year of the sale, calculate the
amount of income recognized under the installment sale
method.
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