Two shareholders of a closely held corporation sell their corporate stock under an installment contract. The contract

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Question:

Two shareholders of a closely held corporation sell their corporate stock under an installment contract. The contract calls for the purchasor to provide a down payment of $300,000 and installment payments of $100,000 per year for the next five years plus additional interest at 6% on the unpaid balance. The shareholders' total basis in the corporate stock is $500,000. The shareholders incurred $20,000 of expenses related to the sale of the business.

If the shareholders used the installment method to compute gain, what is the rate used to compute gain (the gross profit rate) on each of the principal payments?

Enter the rate as a percentage (e.g., 66%, 66.5%) and round any decimal percentage, if applicable, to one place. (SEE THE APPLICATION HANDOUT)