2. Dave owned a beach house in Shelter Cove, California, which he bought for $350,000 on 3-28-2005. Dave lived in the house for most of 2006 and 2007, but then decided he did not like the climate, and moved out, intending to find a buyer. Dave decided not to rent it, so that he would not have to break a lease if a buyer was found. Early in 2012, Dave added an airplane hangar on the property for $106,000. In 2019, Dave sold the house to Jet for $ 570,000 which Jet agreed to pay in installments, with $ 120,000 being paid to Dave upon the closing of escrow on August 1, 2019, and with $ 75,000 due to be paid every August 1st thereafter, for the next six years, with 9% interest to be paid with each installment (total accrued interest was to be paid with each installment). Jet paid each installment with interest when it was due. Dave and Jet, are unrelated individuals, are not self employed, and use cash basis for all income tax income and expense items.

How much gain on the sale of his house must Dave recognize, minimum, and, how much interest income must Dave recognize, in 2019? How much gain and interest must Dave recognize in 2020?

Answer rating: 100% (QA)

GAIN ON SALE OF ASSET SALE PRICE OF HOUSE PURCHA... View the full answer