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igomit [66]
1 year ago
6

On June 15, 2021, Allen sold land held for investment to Stan for $65,000 and an installment note of $300,000 payable in five eq

ual annual installments beginning on June 15, 2022, plus interest at 10%. Allen’s basis in the land is $255,500. What amount of gain is recognized in 2021 under the installment method?
Business
1 answer:
hjlf1 year ago
3 0

The amount of gain that will be recognized in 2021 under the installment method, is $27, 857 . 14

<h3>How to find the gain recognized?</h3>

First, find the profit margin on the land sold by Allen to Stan:
= ( Selling price of land - Allen's basis in the land) / Allen's basis in the land

= ( ( 300, 000 + 65, 000) - 255, 500) ) / 255, 500

= 109, 500 / 255, 500

= 42. 857 %

The gain to be recognized, using the installment method is:
= Profit margin x Amount paid by Allen in 2021

= 42. 857 % x $ 65, 000

= $27, 857 . 14

Find out more on gain recognized at brainly.com/question/17926235

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