Bruce sold his vacation condominium on Maui to Nora for $240,000. At the closing on July 1, Nora paid Bruce $40,000 in cash and gave him a promissory note, secured by a mortgage, for $200,000. The note provided for no interest. The note was payable in installments of $20,000, due on July 1 of each of the next 10 years. Bruce's basis in his condominium was $80,000. The applicable federal rate on the closing date was 5%.

• What is the amount realized on the sale by Bruce? How much interest income does Bruce recognize? When?
• What is Nora's basis in the property? How much interest has she paid? When did she pay it?

Answer rating: 100% (QA)

To determine the amount realized on the sale by Bruce we need to consider the cash received and the ... View the full answer