Determine the interest due which is considered

4. Determine the interest due (which is considered personal interest expense).
EXAMPLE 13.36 Rita Brown sells a painting held for five years
as an investment. The painting was purchased
for $5,000 and sold to Joe Smith for $15,000,
$6,000 down and a $9,000 face value note
worth $7,000 due in three years together with
10 percent interest. If she opts for installment
reporting, her gross profit percentage is 66 2/3:
($15,000 – $5,000)
$15,000
resulting in a capital gain of $4,000 in the year
of sale and $6,000 upon collection of the note
(plus interest).
If Rita elects not to use installment reporting,
the result is as follows:
Year of Sale:
Amount realized
Cash $6,000
Fair market value of note 7,000

PLANNING
POINTER