Question

George sold land to an unrelated party in 2018. His basis in the land was $44,000 in the selling price was $132,000-$33,000 payable at closing and $33,000 (+ 10% interest) due January 1, 2019, 2020 and 2021.

what would be the tax consequence of the following?

treat each part independently, assume that George did not elect out of the installment method and the installment obligations have values equal to their face amounts.

Ignore interest in your calculations. Record the gross profit to three decimal places before converting to a percentage. For example end .48245 would be rounded two .482 and converted to 48.2%. If required, round final answers to the nearest dollar.

a. In 2019, George borrowed 13,200 from the bank the loan was partially secured by the installment notes but George was personally liable for the loan.

Borrowing using the installment notes as security for the debt ( ) is a disposition – therefore, the installment sale gain ( ) accelerated.

b. In 2019, George gave his daughter the right to collect all future payments on the installment obligations. George must recognize a ($ ) gain at the time of the gift.

c. On December 31, 2019, George received the payment due on January 1, 2020. On December 15, 2020 George died, and the remaining installment obligation was transferred to his estate. The estate collected the amount due on January 1, 2021.

George must report a ($ ) gain in 2019 and transfer the installment obligations to George's estate ( ) a taxable event.

Answer 1

Refer the below images for the above asked questions in a detailed way of explanation.
Answer: * Requirement @ : Borrowing using the installment the debt is not a disposition; Sale gain is not accelerated. notes as Security for therefore, the installment Requirement : percentage * The gross prefit is 58.3f-(ie & 77000 ). $ 132000 as a taxable disposition * The gift of the to George's daughter installment obligation * George most recognize a $57717 gain (ie, all of the remaining deferred profit) at the time of the gift. working : 192000 - 4 33000] * 58.3-1. - $ 99000 x 58-34 - $ 577A * In addition, George recognized [ie, 9 33000 x 58.3% in 2018 received at closing. as 8 19239 for the payment he

Regoirement © : * George most report $38478 gain [ie, $ 66000 x 58.3 to] in 2019 from the payment that was received on December 31, 2019, as well as $19939 gain from the payment that was received on January 1, 2019 obligations of to George's * The transfer estate is not the installment a taxable event. However, the estate (or its beneficiaries) will recognize the deferred realized gain (as income in respect of a decedent) when the installment obligation is collected.