Supposing steve collects 5000 not including interest of

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Steve Drake sells a rental house on January 1, 2011 and receives $130,000 cash and a note for $55,000 at 10 percent interest. The purchaser also assumes the mortgage on the property of $45,000. Steve's adjusted basis in the house on teh date of sale is $152,500, and he collects only teh $130,000 down payment in the year of slae.

a. If Steve elects to recognize the total gain on the property in the year of sale, calculate the taxable gain.

b. Supposing Steve collects $5,000 (not including interest) of note principal in year following year of sale, compute the amount of income recognized under installment sale method.

Reference no: EM13454242

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