Nick sells land with a $7,000 adjusted basis for $10,000. Nick receives a $2,000 down payment with the balance o due the following year. Nick is unable to collect the remaining $8,000 and, after incurring legal fees of $500, he repossesses the land when it has a fair market value of $9,000.
a. What is the amount of gain that Nick must report in the first year?
b. What is the amount of gain that Nick must report in the second year?
c. What is the basis in the repossessed stock?

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The Answer of Nick sells land with a $7,000 adjusted basis for $10,000. Nick receives a $2,000 down payment with the balance o due the following year. Nick is unable to collect the remaining $8,000 and, after incurring legal fees of $500, he repossesses the land when it has a fair market value of $9,000.
a. What is the amount of gain that Nick must report in the first year?
b. What is the amount of gain that Nick must report in the second year?
c. What is the basis in the repossessed stock?

Nick Sells Land with a $7,000 Adjusted Basis for $10,000