Hal sold land held as an investment with a fair market value of $100,000 for $36,000 cash and a note for $64,000 that was due in two years.The note bore interest of 7% when the applicable Federal rate was 4%.Hal's cost of the land was $40,000.Because of the buyer's good credit record and the high interest rate on the note,Hal thought the fair market value of the note was at least $74,000.

Question

Quizplus · Accepted Answer

Under the installment method,Hal's recognized gain in the year of sale is as follows: [($100,000 - $40,000)/$100,000] × $36,000 = $21,600

Hal Sold Land Held as an Investment with a Fair