Sally Sold a Painting to Jenny for $2,500

Sally sold a painting to Jenny for $2,500. Sally's adjusted basis in the painting was $1,000. Sally received $1,250 in the year of sale and $1,250 the next year. Since Sally knew Jenny she did not charge interest on the deferred payment, upon audit the IRS will:

A) impute interest at 6% on the deferred payment
B) impute interest at the applicable federal rate on the deferred payment
C) not impute any interest on the deferred payment
D) require Sally to recompute the contract with the current market interest rate