Charlotte sold her unincorporated business for $600,000 in 2017. 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

To calculate the gain eligible for installment sales treatment, we need to first calculate the total gain on the sale, which is the sales price ($600,000) minus the total basis ($150,000 for land). The total gain is $450,000.
Next, we need to allocate the gain to each asset based on the sales contract. The equipment allocation does not generate any taxable gain since it was fully depreciated and had a zero basis. The land allocation generates a gain of $150,000 - $150,000 (original cost) = $0. Finally, the goodwill allocation generates a gain of $180,000, which is eligible for installment sales treatment. Therefore, the amount of gain eligible for installment sales treatment is $180,000.
Hence, the answer is B, $330,000.

Charlotte Sold Her Unincorporated Business for $600,000 in 2017