A cash basis taxpayer sold investment land in 2012 for $200,000.He received $40,000 in the year of sale and $160,000 in 2013.The cost of the land was $80,000.Under the installment method, the taxpayer would report a $24,000 gain in 2012.

Question

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Under the installment method, the gain is reported as payments are received. The total gain is $120,000 ($200,000 sale price - $80,000 cost). The gross profit percentage is 60% ($120,000 gain / $200,000 sale price). In 2012, the taxpayer received $40,000, so the reported gain is 60% of $40,000, which is $24,000.

A Cash Basis Taxpayer Sold Investment Land in 2012 for $200,000.He