Kevin sold property with an adjusted basis of $58,000. The buyer assumed Kevin's existing mortgage of $40,000 and agreed to pay an additional $60,000 consisting of a cash down payment of $40,000, and payments of $4,000, plus interest, per year for the next 5 years. Kevin paid selling expenses totaling $2,000. What is Kevin's gross profit percentage?

Question

Quizplus · Accepted Answer

Kevin's gross profit is calculated as the total selling price minus the adjusted basis and selling expenses. The total selling price is $100,000 ($40,000 mortgage assumed + $60,000 additional payment). The gross profit is $40,000 ($100,000 - $58,000 - $2,000). The gross profit percentage is then $40,000 / $60,000 = 66 2/3%.

Kevin Sold Property with an Adjusted Basis of $58,000