In 2012, Beth sold equipment used in her business.Her basis in the property was $300,000 ($500,000 cost less $200,000 of depreciation).Beth sold the property for $400,000, with $100,000 due on the date of the sale and $300,000 (plus interest at the Federal rate) due in 2013.Beth's recognized installment sale gain in 2013 is:

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Beth's realized gain on the sale is $100,000 ($400,000 selling price - $300,000 basis). However, since she is using the installment method and only received $100,000 in 2012, she only recognizes a proportionate amount of the gain based on the ratio of the down payment to the total selling price. 
The down payment of $100,000 represents 25% ($100,000/$400,000) of the total selling price, so Beth recognizes 25% of the realized gain, which is $25,000 ($100,000 x 0.25), in 2012. 
The remaining gain of $75,000 ($100,000 - $25,000) will be recognized in 2013 when the larger payment is received. Therefore, Beth's recognized installment sale gain in 2013 is $100,000 ($75,000 gain + $25,000 recognized in 2012).

In 2012, Beth Sold Equipment Used in Her Business