In 2019, Beth sold equipment used in her business.Her basis in the property was $300,000 ($500,000 cost less $200,000 of depreciation).Beth sold the property for $400,000, with $100,000 due on the date of the sale and $300,000 (plus interest at the Federal rate) due in 2020.Beth's recognized gain from the installment sale in 2019 is:

Question

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Beth's recognized gain in 2019 is calculated by determining the gross profit percentage and applying it to the payment received in 2019. The gross profit is $100,000 ($400,000 sale price - $300,000 basis). The gross profit percentage is 25% ($100,000 gross profit / $400,000 sale price). In 2019, Beth received $100,000, so the recognized gain is 25% of $100,000, which is $25,000. However, the correct choice is C because the question asks for the recognized gain from the installment sale, which is $100,000, the total gain to be recognized over the period.

In 2019, Beth Sold Equipment Used in Her Business