Reference no: EM132889463

Problem 1: The installment method can be used for which of the following sales with payments being made in the year following the year of sale?

a. A department store's credit card sales of its merchandise.

b. An individual's sale of common stock in a family-owned business.

c. An individual's sale of General Electric common stock.

d. Depreciable equipment sold for less than its original cost.

e. All of the above.

Problem 2: Juan, who is not a dealer in real property, sold land that he owned. His adjusted basis in the land was $700,000 and it was encumbered by a mortgage for $100,000. The terms of the sale required the buyer to pay Juan $200,000 in cash on the date of the sale. The buyer assumed Juan's mortgage and gave Juan a note for $800,000 (plus interest at the applicable Federal rate) due in the following year. What is the gross profit percentage for installment sale purposes?

a. $700,000/$1,100,000 = 63.64%.

b. $500,000/$1,200,000 = 41.67%.

c. $700,000/$1,200,000 = 58.33%.

d. $500,000/$1,100,000 = 45.45%.

e. $400,000/$1,000,000 = 40%.