A taxpayer holds an installment obligation calling for a payment of $15,000. The gross profit percentage on
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Question:
- A taxpayer holds an installment obligation calling for a payment of $15,000. The gross profit percentage on the original installment sale was 80%. What is the adjusted basis of the installment obligation?
- Suppose the taxpayer in the previous example gives the installment obligation to his daughter. What are the tax consequences if any to the father?
- The taxpayer sells a painting for $10,000 in which he had an adjusted basis of $1,500. There were no selling expenses. $3,000 was paid in year one and $7,000 was to be paid in year 2. The buyer defaulted on the year 2 payment and the seller repossessed the painting. The cost of the repossession was $500. The value of the painting at the time of repossession was $11,000. What are the tax consequences to the original seller?
- Suppose the taxpayer in the previous example gives the installment obligation to his daughter. What are the tax consequences if any to the father?
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