Problem 8-19 Calculation of Gain or Loss, Installment Sales (LO 8.8, 8.10) Steve Drake sells a...

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Problem 8-19 Calculation of Gain or Loss, Installment Sales (LO 8.8, 8.10) Steve Drake sells a rental house on January 1, 2022, and receives $100,000 cash and a note for $50,000 at 7-percent interest. The purchaser also assumes the mortgage on the property of $30,000. Steve's original cost for the house was $175,000 on January 1, 2014, and accumulated depreciation was $30,000 on the date of sale. He collects only the $100,000 down payment in the year of sale. a. If Steve elects to recognize the total gain on the property in the year of sale, calculate the taxable gain. 35,000 Feedback Check My Work b. Assuming Steve uses the installment sale method, complete Form 6252 for the year of the sale. If an amount is zero, enter "0". Enter all amounts as positive numbers. Round all decimals to four places and any dollar amount to the nearest dollar. Form 6252 Department of the Treasury Internal Revenue Service Name(s) shown on return Steve Drake Installment Sale Income Attach to your tax return. Use a separate form for each sale or other disposition of property on the installment 1 Description of property 2a Date acquired (mm/dd/yyyy) method. Go to www.irs.gov/Form 6252 for the latest information. Rental Property 01/01/2014 OMB No. 1545-0228 2022 Attachment Sequence No. 67 Identifying number b Date sold (mm/dd/yyyy) 01/01/2022 Part I Gross Profit and Contract Price. Complete this part for all years of the installment agreement. 5 Selling price including mortgages and other debts. Don't include interest, whether stated or unstated 5 180,000 6 Mortgages, debts, and other liabilities the buyer assumed or took the property subject to (see instructions). 6 30,000 7 Subtract line 6 from line 5.. 7 150,000 B Cost or other basis of property sold 8 175,000 9 Depreciation allowed or allowable. 9 30,000 10 Adjusted basis. Subtract line 9 from line 8. 10 10 145,000 11 Commissions and other expenses of sale. 11 0 12 Income recapture from Form 4797, Part III (see instructions).. 12 12 X 13 Add lines 10, 11, and 12.. 14 Subtract line 13 from line 5. If zero or less, don't complete the rest of this form. See instructions. 13 14 15 If the property described on line 1 above was your main home, enter the amount of your excluded gain. See instructions. Otherwise, enter -0-.. 16 Gross profit. Subtract line 15 from line 14. 17 Subtract line 13 from line 6. If zero or less, enter -0- 18 Contract price. Add line 7 and line 17... 15 16 17 0 18 150,000 V Part II Installment Sale Income. Complete this part for all years of the installment agreement. 19 Gross profit percentage (expressed as a decimal amount). Divide line 16 by line 18. (For years after the year of sale, see instructions). 19 20 If this is the year of sale, enter the amount from line 17. Otherwise, enter -0- 20 21 Payments received during year (see instructions). Don't include interest, whether stated or unstated.. 21 100,000 2 Add lines 20 and 21..... 3 Payments received in prior years (see instructions). Don't include interest, whether stated or unstated. ... 24 14 Installment sale income. Multiply line 22 by line 19.. 23 0 222 24 100,000 25 0 25 Enter the part of line 24 that is ordinary income under the recapture rules. See instructions..... 26 Subtract line 25 from line 24. Enter here and on Schedule D or Form 4797. See instructions..... 26 c. Assuming Steve collects $5,000 (not including interest) of the note principal in the year following the year of sale, calculate the amount of income recognized in that year under the installment sale method. Round your answer to the nearest dollar. Problem 8-19 Calculation of Gain or Loss, Installment Sales (LO 8.8, 8.10) Steve Drake sells a rental house on January 1, 2022, and receives $100,000 cash and a note for $50,000 at 7-percent interest. The purchaser also assumes the mortgage on the property of $30,000. Steve's original cost for the house was $175,000 on January 1, 2014, and accumulated depreciation was $30,000 on the date of sale. He collects only the $100,000 down payment in the year of sale. a. If Steve elects to recognize the total gain on the property in the year of sale, calculate the taxable gain. 35,000 Feedback Check My Work b. Assuming Steve uses the installment sale method, complete Form 6252 for the year of the sale. If an amount is zero, enter "0". Enter all amounts as positive numbers. Round all decimals to four places and any dollar amount to the nearest dollar. Form 6252 Department of the Treasury Internal Revenue Service Name(s) shown on return Steve Drake Installment Sale Income Attach to your tax return. Use a separate form for each sale or other disposition of property on the installment 1 Description of property 2a Date acquired (mm/dd/yyyy) method. Go to www.irs.gov/Form 6252 for the latest information. Rental Property 01/01/2014 OMB No. 1545-0228 2022 Attachment Sequence No. 67 Identifying number b Date sold (mm/dd/yyyy) 01/01/2022 Part I Gross Profit and Contract Price. Complete this part for all years of the installment agreement. 5 Selling price including mortgages and other debts. Don't include interest, whether stated or unstated 5 180,000 6 Mortgages, debts, and other liabilities the buyer assumed or took the property subject to (see instructions). 6 30,000 7 Subtract line 6 from line 5.. 7 150,000 B Cost or other basis of property sold 8 175,000 9 Depreciation allowed or allowable. 9 30,000 10 Adjusted basis. Subtract line 9 from line 8. 10 10 145,000 11 Commissions and other expenses of sale. 11 0 12 Income recapture from Form 4797, Part III (see instructions).. 12 12 X 13 Add lines 10, 11, and 12.. 14 Subtract line 13 from line 5. If zero or less, don't complete the rest of this form. See instructions. 13 14 15 If the property described on line 1 above was your main home, enter the amount of your excluded gain. See instructions. Otherwise, enter -0-.. 16 Gross profit. Subtract line 15 from line 14. 17 Subtract line 13 from line 6. If zero or less, enter -0- 18 Contract price. Add line 7 and line 17... 15 16 17 0 18 150,000 V Part II Installment Sale Income. Complete this part for all years of the installment agreement. 19 Gross profit percentage (expressed as a decimal amount). Divide line 16 by line 18. (For years after the year of sale, see instructions). 19 20 If this is the year of sale, enter the amount from line 17. Otherwise, enter -0- 20 21 Payments received during year (see instructions). Don't include interest, whether stated or unstated.. 21 100,000 2 Add lines 20 and 21..... 3 Payments received in prior years (see instructions). Don't include interest, whether stated or unstated. ... 24 14 Installment sale income. Multiply line 22 by line 19.. 23 0 222 24 100,000 25 0 25 Enter the part of line 24 that is ordinary income under the recapture rules. See instructions..... 26 Subtract line 25 from line 24. Enter here and on Schedule D or Form 4797. See instructions..... 26 c. Assuming Steve collects $5,000 (not including interest) of the note principal in the year following the year of sale, calculate the amount of income recognized in that year under the installment sale method. Round your answer to the nearest dollar.