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iren [92.7K]
3 years ago
5

Pat sells land for $25,000 cash and a $75,000 5-year note. If her basis in the property is $30,000 and she receives only the $25

,000 down payment in the year of sale, how much is Pat's taxable gain in the year of sale using the installment sales method?
Business
1 answer:
LuckyWell [14K]3 years ago
8 0

Answer:

$17,500

Explanation:

Calculation of Pat's taxable gain in the year of sale using the installment sales method :

First step is to add up Land + Cash

$75,000+$25,000

=$100,000

Second step

([$100,000-$30,000)/$100,000]*$25,000

=($70,000/100,000)*$25,000

Hence:

0.7*$25,000

=$17,500

Therefore Pat's taxable gain in the year of sale using the installment sales method will be $17,500

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