On September 2 of this year,Keshawn sold land to Rex,his nephew,for $400,000.Keshawn's basis in the land was $100,000.Rex agreed to pay his uncle $40,000 this year,and $60,000 each year for the next six years plus interest.One month later,Rex sold the land to Theo,an unrelated party,for $450,000.Based on this information,Keshawn must report

Question

Quizplus · Accepted Answer

Keshawn sold the land on an installment basis, so he reports the gain proportionally as he receives payments. The total gain is $300,000 ($400,000 - $100,000). The gain percentage is 75% ($300,000 gain / $400,000 sale price). For the $40,000 received this year, the gain is $30,000 (75% of $40,000). For each $60,000 payment in the following years, the gain is $45,000 (75% of $60,000). Interest is reported separately.

On September 2 of This Year,Keshawn Sold Land to Rex,his