Question: Jay would like to know how the down payment and 1st installment for the sale of his business will be treated for tax purposes. The

Jay would like to know how the down payment and 1st installment for the sale of his business will be treated for tax purposes. The business was sold 3 weeks ago to his son for $10,000,000. The terms of the agreement are: 20% down payment, 10-year, 4.5% note that will start paying quarterly on May 1, 2016. The tax basis is $4,245,000. Calculate the tax treatment realized on the 1st installment payment (round to the nearest dollar) with this formula:

Installment Payment

Less: Interest Income

Net

Less: Return ofBasis

Realized & Recognized Long-Term Capital Gain

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