Question

# Steve sold for \$200,000 his undivided one-third interest in an apartment building in which he had...

Steve sold for \$200,000 his undivided one-third interest in an apartment building in which he had \$30,000 adjusted basis. The buyer put \$40,000 down, assumed Steve’s share of the mortgage, and signed an installment obligation with a face value of \$120,000. \$20,000 of the principal was paid at the end of the year sale. Compute the following:

a. Contract price

b. Gross profit and gross profit percentage.

c. Payment in year of sale

d. Gain in the year of sale

 a) Down payment \$   40,000.00 Installment obligation \$ 120,000.00 Excess of mortgage assumed over basis(30000-2000) \$   10,000.00 Contract price \$ 170,000.00 b) Gross proft  = \$170,000 - \$0 \$ 170,000.00 Gross proft percentage = 100% (\$170,000 ÷ \$170,000). 100% c) Down payment \$   40,000.00 Mortgage assumed over basis \$   10,000.00 Installment payment made \$   20,000.00 Payments in year of sale \$   70,000.00 d) Gain in year of sale \$ 100,000.00

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