In 2015, 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 2016, 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 2016.

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Under the installment sale method, the gain recognized is based on the gross profit percentage. The gross profit is $301,000 ($775,000 - $474,000), and the gross profit percentage is 38.84% ($301,000 / $775,000). In 2016, TPC received $67,500 in principal, so the recognized gain is $26,216 ($67,500 * 38.84%).