Nick Sells Land with a $7,000 Adjusted Basis for $10,000

question 60

Essay

Nick sells land with a $7,000 adjusted basis for $10,000.Nick receives a $2,000 down payment with the balance of $8,000 due the following year.Nick is unable to collect the remaining $8,000 and,after incurring legal fees of $500,he repossesses the land when it has a fair market value of $9,000.
a.What is the amount of gain that Nick must report in the first year?
b.What is the amount of gain that Nick must report in the second year?
c.What is the basis in the repossessed stock?

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Definitions:

Sensate Focus

A technique used in sex therapy that involves partners taking turns touching each other to enhance mutual intimacy and understanding, focusing on the sense of touch.

Sexual Activity

Behaviors involving the expression of sexuality between individuals, including but not limited to intercourse.

Sexual Sadist

A sexual sadist is an individual who derives pleasure or sexual gratification from inflicting pain, suffering, or humiliation on others.

Psychodynamic

Pertains to a psychological approach or theory that emphasizes unconscious psychological processes and their influence on human behavior.