In 2014, 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 2015, 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 2015.

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The gain recognized in 2015 is calculated by multiplying the gross profit percentage by the principal payment received. The gross profit percentage is ($775,000 - $474,000) / $775,000 = 38.71%. The principal payment received in 2015 is $67,500. Therefore, the gain recognized is 38.71% of $67,500, which is $26,216.