On August 15,2010,Susie sold a piece of property for $250,000 which she originally purchased for $50,000.She was paid $50,000 in cash and received an 8 percent note.The note is payable at $10,000 per year for 20 years starting on August 15,2011 plus interest.Assuming that Susie uses the installment method,how much is her capital gain for 2011,the second year of the installment sale?

Question

Quizplus · Accepted Answer

In 2011, Susie receives $10,000 as principal payment. The gross profit percentage is 80% (($250,000 - $50,000) / $250,000). Therefore, the capital gain recognized in 2011 is 80% of $10,000, which is $8,000.

On August 15,2010,Susie Sold a Piece of Property for $250,000