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Prepayment for services to be rendered this year, check cashed by payee in December. h. Gregory McDonald sold a piece of land he purchased for $5,000 many years ago. He recently mortgaged 82. the property for $30,000, but after six months he sold the land for $50,000 to his cousin, Gus. If Gus purchased the land for cash and Gregory paid off the mortgage, what is the contract price, the a. gross profit, and the gross profit percentage? If Gus took the land subject to the mortgage and paid $5,000 a year, plus 10 percent interest for four b. years, starting with the year of sale, what is the contract price and the gain in the year of the sale? For each of the following changes in accounting method or period explain (1) if permission is needed and 83. (2) the tax effect of the change. Changing from a calendar to a fiscal year Changing from FIFO to LIFO b. Changing from the cash to accrual method c. Changing from the expensing to capitalizing carrying charges d. Changing from ACRS to the “units of production” method e. Changing from accruing accounts receivable at the time the order is received to the time that title f. changes Sandra Surrey sold her racehorse for $40,000 to Mickey Jockey and received $10,000 down and a note 84. for $30,000 (value $25,000) due in three years together with accrued interest of 12 percent compounded semiannually. If the note is paid on time and the horse is Section 1231 property in which Sandra had a basis of $15,000, what are the tax consequences to Sandra if: Sandra elects out of installment reporting? a. Sandra reports her gain on the installment method? b. Xeno Corporation was formed in 2007 and adopted a calendar year. In 2010, it switched to a fiscal year 85. beginning April 1. The only available information is for January 1 through March 31. Taxable income for the three months was $23,000. Determine Xeno’s tax liability for the short period. When is the short period’s tax return due? Is there any relief available to Xeno Corporation? a.