4. M sold investment real estate to B in 2020 for $100,000. M purchased the property...

4. M sold investment real estate to B in 2020 for $100,000. M purchased the property 5 years ago for $60,000. The terms of the sale indicated that B was to pay $20,000 to M in 2020, $50,000 in 2021, and the remaining balance of $30,000 in 2022. M elected to use the installment method to report the gain. Assuming the payments are made as agree upon, how much gain should M report for each year?

1）2020

2）2021

3）2022

Solutions

Expert Solution

Money paid by M 5 years ago-$60000

Money at which the land is being sold to B-$100000

Gain on the sale of land-Value of land sale-value on which the land was purchased

Gain=$100000-$60000

Gain=$40000

so if we dvide $40000 by 5

we will get $8000 which we will divide in the years of installments

YEAR	INSTALLMENT+GAINS	TOTAL INSTALLMENT
2020	$12000+$8000	$20000
2021	$34000+$16000	$50000
2022	$14000+$16000	$30000

Rahul Sunny answered 1 year ago

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