Charlotte sold her unincorporated business for $600,000 in 2016.The sales contract allocated $120,000 to equipment,$300,000 to land,and $180,000 to goodwill.Charlotte had a $0 basis in the goodwill,the land cost $150,000,and the equipment originally cost $250,000 but it was fully depreciated.What is the amount of the gain eligible for installment sales treatment?

Question

Quizplus · Accepted Answer

The gain eligible for installment sales treatment is calculated as the selling price ($600,000) minus the adjusted basis of the assets sold, which are the land ($150,000) and the equipment ($0, since it was fully depreciated). Therefore, the gain eligible for installment sales treatment is $450,000 ($600,000 - $150,000). The allocation to goodwill does not affect the gain eligible for installment sales treatment, since goodwill is not a depreciable or tangible asset.

Charlotte Sold Her Unincorporated Business for $600,000 in 2016