Sandra Surrey sold her racehorse for $40,000 to Mickey Jockey and received $10,000 down and a note for $30,000 (value $25,000) due in three years together with accrued interest of 12 percent compounded semiannually. If the note is paid on time and the horse is Section 1231 property in which Sandra had a basis of $15,000, what are the tax consequences to Sandra if:
a. Sandra elects out of installment reporting?
b. Sandra reports her gain on the installment method?

Question

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The Answer of Sandra Surrey sold her racehorse for $40,000 to Mickey Jockey and received $10,000 down and a note for $30,000 (value $25,000) due in three years together with accrued interest of 12 percent compounded semiannually. If the note is paid on time and the horse is Section 1231 property in which Sandra had a basis of $15,000, what are the tax consequences to Sandra if:
a. Sandra elects out of installment reporting?
b. Sandra reports her gain on the installment method?

Sandra Surrey Sold Her Racehorse for $40,000 to Mickey Jockey