Juan,not a dealer in real property,sold land that he owned.His adjusted basis in the land was $500,000 and it was encumbered by a mortgage for $150,000.The terms of the sale required the buyer to pay Juan $100,000 on the date of the sale.The buyer assumed Juan's mortgage and gave Juan a note for $550,000 (plus interest at the Federal rate)due in the following year.What is the gross profit percentage?

Question

Quizplus · Accepted Answer

The gross profit is calculated as the selling price minus the adjusted basis.

Selling price = $100,000 (paid at the time of sale) + $550,000 (note due in the following year) = $650,000

Adjusted basis = $500,000

Gross profit = $650,000 - $500,000 = $150,000

Gross profit percentage = (gross profit / selling price) x 100%

= ($150,000 / $650,000) x 100%

= 23.08%

Therefore, the correct answer is option B) 300/650 = 46.15%.

Juan,not a Dealer in Real Property,sold Land That He Owned