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TPC Inc sold investment land. Gain to be recognized in 2008

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In 2007, TPC Inc. sold investment land with a $474,000 book and tax basis for $775,000. The purchaser paid $100,000 in cash and gave TPC a note for the $675,000 balance of the price. In 2008, TPC received a $105,500 payment on the note ($67,500 principal + $38,000 interest). Assuming that TPC is using the installment sale method,
compute its gain recognized in 2008.

A. $26,216
B. $40,976
C. $67,500
D. None of the above

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Solution Summary

The solution lays out all the calculations needed to arrive at the answer to the problem.

Solution Preview

For tax reporting, the Form 6252 is used to calculate the amount of taxable gain to be reported.

Selling price is 775,000
Basis is 474,000

Gain is ...

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