A cash basis taxpayer sold investment land in 2010.He received $35,000 in the year of sale and $105,000 in 2011.The cost of the land was $100,000.Under the installment method,the taxpayer would report a $10,000 gain in 2010.

Question

Quizplus · Accepted Answer

Under the installment method, the gain is reported proportionally as payments are received. In 2010, the taxpayer received $35,000, which is 25% of the total $140,000 received. The total gain is $40,000 ($140,000 - $100,000 cost), so 25% of the gain is $10,000, which is reported in 2010.

A Cash Basis Taxpayer Sold Investment Land in 2010