Albatross Corporation acquired land for investment purposes in 2001 at a cost of $100,000.Albatross sold the land to Monty on December 30,2015,and did not elect out of the installment method of accounting.The selling price of the property was $400,000.Monty made a cash down payment of $50,000 on the date of sale and executed a $350,000 note,payable in seven annual installments of $50,000 each plus interest at the rate of 6% per annum.The first installment of $50,000 was due in 2016 which Monty paid,plus interest of $21,000.Discuss the effect of this sale on Albatross's taxable income and its E & P account in 2015 and 2016.

Question

Quizplus · Accepted Answer

The Answer of Albatross Corporation acquired land for investment purposes in 2001 at a cost of $100,000.Albatross sold the land to Monty on December 30,2015,and did not elect out of the installment method of accounting.The selling price of the property was $400,000.Monty made a cash down payment of $50,000 on the date of sale and executed a $350,000 note,payable in seven annual installments of $50,000 each plus interest at the rate of 6% per annum.The first installment of $50,000 was due in 2016 which Monty paid,plus interest of $21,000.Discuss the effect of this sale on Albatross's taxable income and its E & P account in 2015 and 2016.

Albatross Corporation Acquired Land for Investment Purposes in 2001 at a Cost