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M sold investment real estate to B in 2020 for $100,000
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
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 |
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