Dan Acquired Rental Property in June 2005 for $370,000 and Sold

question 71

Essay

Dan acquired rental property in June 2005 for $370,000 and sold it in October, 2015. $40,000 in straight-line depreciation has been taken on the house. A run-up in housing prices in San Diego allowed him to sell the house for $575,000. In the year of sale, Dan received $175,000 when the buyer sold some investments, an additional $200,000 when the buyer closed a loan from the bank, and took a $200,000 note from the buyer, payable on the anniversary of the sale date in 10 installments of $20,000 each plus interest on the unpaid balance.
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Using the installment method, calculate his taxable gain in the year of sale.

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Definitions:

Income Share

The portion or percentage of national income or personal revenue received by an individual or group, often studied in the context of economic inequality.

Social Stratification

Refers to the way in which society is organized into layers based on wealth, power, and status.

Hierarchical Structure

An organizational system arranged in levels of importance or authority.

Wealthy Country

A nation characterized by a high level of economic development, significant gross domestic product (GDP) per capita, and an overall high standard of living.