Ask Question
BusinessBusiness
16 January, 09:58

Arnold gave land to his son, Bruce. Arnold's basis in the land was $100,000, and its fair market value at the date of the gift was $150,000. Bruce borrowed $130,000 from a bank that he used to improve the property. He sold the property to Della for $360,000. Della paid Bruce $90,000 in cash, assumed his $120,000 mortgage, and agreed to pay $150,000 in two years. Bruce's selling expenses were $10,000. Della is going to pay adequate interest.

Compute the following amounts:

a. Bruce's basis in the land at the time of the sale is $ ...

b. When computing his realized gain, what amount does Bruce use as the selling price and as the contract price?

Selling price: $ ...

Contract price: $ ...

c. Bruce's total realized gain on the sale is $ ..., but his recognized gain in the year of the sale is $ ...

+3
Answers (1)
  1. 16 January, 10:22
    0
    a. Bruce's basis in the land at the time of the sale is Arnold's basis+Cost of improvement = 100,000+130,000 = $ 230,000

    b. When computing his realized gain, what amount does Bruce use as the selling price and as the contract price?

    Selling price is $360,000 (given)

    Contract price is $240,000

    Contract price = Selling price - Mortgage on loan = 360,000 - 120,000 = $240,000

    c. Bruce's total realized gain on the sale is $120,000 but his recognized gain in the year of the sale is $45,000

    Total gain = Total selling price - Bruce's adjusted basis - Selling expenses = 360,000 - 230,000 - 10,000 = $120,000

    Installment sale gain = Total gain/Contract price * Payments received = (120,000/240,000) * 90,000 = $45,000
Know the Answer?
Not Sure About the Answer?
Find an answer to your question 👍 “Arnold gave land to his son, Bruce. Arnold's basis in the land was $100,000, and its fair market value at the date of the gift was ...” in 📗 Business if the answers seem to be not correct or there’s no answer. Try a smart search to find answers to similar questions.
Search for Other Answers
You Might be Interested in
How can different ways of communicating lead to misunderstanding?
Answers (2)
It costs Glenwood, Inc. $82 per unit to manufacture 1,000 units per month of a product that it can sell for $122 each. Alternatively, Glenwood could process the units further into a more complex product, which would cost an additional $36 per unit.
Answers (1)
We assume that the representative consumer's preferences exhibit the properties that a. each consumer has one strictly preferred good and that consumption and leisure are both normal goods. b.
Answers (1)
If you borrow money from a lending institution and agree to pay back the original amount plus the accrued interest, what does it signify? A. credit from the lending institution B. you are a creditor in the Lending institution's account C.
Answers (1)
Which describes the difference between a trade surplus and a trade deficit? A trade surplus is when a country exports more than it imports, while a trade deficit happens when imports exceed exports.
Answers (1)
New Questions in Business
Units to be Assigned Costs Oak Ridge Steel Company has two departments, Casting and Rolling. In the Rolling Department, ingots from the Casting Department are rolled into steel sheet.
Answers (1)
Select all the correct answers Amber is writing to an accountant that she would like to interview to gain information about the career field. What information should she include in her letter? A.
Answers (2)
What is the acid-test ratio for a merchant with the following account balances? (Round your answer to two decimal places.
Answers (2)
When the market fails to adjust for the full costs of a firm's behavior, this is called?
Answers (1)
What is the basic formula of the malthus theorem?
Answers (1)
Home » Business » Arnold gave land to his son, Bruce. Arnold's basis in the land was $100,000, and its fair market value at the date of the gift was $150,000. Bruce borrowed $130,000 from a bank that he used to improve the property.
Sign Up Forgot Password?