In 2017, TPC Inc. sold investment land with a $474,000 book and tax basis for $775,000. The purchaser paid $100,000 in cash and gave TPC a note for the $675,000 balance of the price. In 2018, TPC received a $105,500 payment on the note ($67,500 principal + $38,000 interest). Assuming that TPC is using the installment sale method, compute its gain recognized in 2018.

Question

Quizplus · Accepted Answer

$67,500 principal payment × ($301,000 gain/$775,000 contract price) = $26,216 recognized gain.