Kay, who is not a dealer, sold an apartment house to Polly during the current year (2017).

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Kay, who is not a dealer, sold an apartment house to Polly during the current year (2017). The closing statement for the sale is as follows:


Total selling price Add: Polly's share of property taxes (six months) paid by Kay Less: Kay's 8% mortgage assumed by Pol


During 2017, Kay collected $9,000 in principal on the installment note and $2,000 of interest. Kay€™s basis in the property was $110,000 [$125,000 - $15,000 (depreciation)].
The Federal rate is 6%.
a. Compute the following:
1. Total gain.
2. Contract price.
3. Payments received in the year of sale.
4. Recognized gain in the year of sale and the character of such gain.
b. Same as parts (a)(2) and (3), except that Kay€™s basis in the property was $35,000.

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South-Western Federal Taxation 2018 Comprehensive

ISBN: 9781337386005

41st Edition

Authors: David M. Maloney, William H. Hoffman, Jr., William A. Raabe, James C. Young

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