Simon sold investment property 2 years ago for $750. Simon's basis in the property was $300. Simon is receiving $150 per year from the buyer. Simon reports this income on the installment method. If Simon collects $150 in principal during the current year, how much gain should he report from the sale for the year?

Question

Quizplus · Accepted Answer

Simon's total gain from the sale is $450 ($750 sale price - $300 basis). The gross profit percentage is $450/$750 = 60%. Therefore, for each $150 installment received, Simon reports 60% as gain, which is $90.

Simon Sold Investment Property 2 Years Ago for $750