Jasmine sold land for $250,000 in 2016.The land had a basis of $118,000 and she incurred selling expenses of $10,000.Jasmine received $50,000 down in 2016 and will receive five additional annual payments of $40,000 each.How much income will Jasmine recognize in 2017 when she receives the first additional payment of $40,000?

Question

Quizplus · Accepted Answer

The gain on the sale is calculated as the selling price minus the basis and selling expenses: $250,000 - $118,000 - $10,000 = $122,000. The gross profit percentage is $122,000 / $250,000 = 48.8%. In 2017, Jasmine receives $40,000, and the income recognized is 48.8% of $40,000, which is $19,520.

Jasmine Sold Land for $250,000 in 2016