John 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 to a third party for 4 million on Feb, 1 2022. The terms of the agreement are a 25% down payment, an 8-yr, 4% note that will start payment monthly on March 1, 2022. The tax basis is $1,075,000

 

1. Calculate the tax treatment on the payment-

Down Payment= ?

Less: Return of Basis= ?

Realized and Recognized Long Term Capital Gain= ?

 

2. Calculate the tax treatment on the 1st installment payment (round to the nearest dollar)

installment payment= ?

Less: Interest income= ?

Net= ?

Less: Return of basis=  ?

Realized and Recognized Long Term capital gain= ?