) Please list all primary authority relied upon in completing (b) and (c): b) Ti
ID: 2776056 • Letter: #
Question
) Please list all primary authority relied upon in completing (b) and (c): b) Timon decides to sell 5 acres of land for $100,000. The cost basis for the land is $37,500. Timon agrees to sell the property for four equal payments of $25,000 - one now and the other three on January 1 of the next 3 years. The note bears adequate interest. What amount of gain is realized on the sale? What amount of gain is recognized in Year 1? What is Timon's basis in the note receivable at the end of Year 2? c) Caleb sells machinery for $90,000 for two equal payments of $45,000 (plus interest). Caleb's original basis was $80,000 and he has claimed $30,000 of depreciation deductions up to the time of sale. Caleb will receive 1 payment now and one next year. What amount of gain is realized on the sale? What amount of gain is recognized in Year 1?
Explanation / Answer
Answer (b) Gain is realized in the sale of a land
Sale price of Land $ 100000
Cost of Land $ 37500.
Net Gain on sale of land $ 62500.
In year 1 recognize gain amount should be $ 62500. becasue Gain recognize on the basis of sale not on the reliastaion.
Under reciveable amount Timon show (100000-25000*2) $ 50000.
Answer c Amount of gain reliaze on sale of Machine
Sale value of Machine $ 90000
Less Cost of Machine
Cost price of machine 80000
Depreciation Charged 30000
Machine valueat the sale time 50000 $ 50000
Gain relaize on sale of Machine $ 40000
In year 1 recognize gain amount will be $ 40000.
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