McGraw-Hill's Taxation of Individuals 3rd Edition by Brian Spilker,Benjamin Ayers,John Robinson,Edmund Outslay ,Ronald Worsham,John Barrick,Connie Weaver

Exercise 58

In year 0, Javens, Inc.sold machinery with a fair market value of $400,000 to Chris.The machinery's original basis was $317,000 and Javens's accumulated depreciation on the machinery was $50,000, so its adjusted basis to Javens was $267,000.Chris paid Javens $40,000 immediately (in year 0) and provided a note to Javens indicating that Chris would pay Javens $60,000 a year for six years beginning in year 1.What is the amount and character of the gain that Javens will recognize in year 0 What amount and character of the gain will Javens recognize in years 1 through 6