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installment_sale - year 2 Selling expenses are $13,000...

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Topic: Installment sales method Gina, an accrual basis taxpayer, sells equipment of $200,000. The equipment had originally cost $70,000 and $10,000 of MACRS cost recovery has been deducted before the sale. The buyer assumes the existing mortgage of $50,000, pays $10,000 down, and agrees to pay $10,000 per year for 14 years plus interest at 8% on the unpaid balance. Interest and principal payments are due at the beginning of the year starting in
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Unformatted text preview: year 2. Selling expenses are $13,000. Required: 1. Compute the gain recognized in year 1. 2. Compute the gain recognized in subsequent years. 3. Assume that Gina is unable to collect the final $10,000 installment because the buyer declares bankruptcy. What would Gina report on her tax return?...
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