Pedro Sells Land That He Held as an Investment with a Basis

question 119

Short Answer

Pedro sells land that he held as an investment with a basis of $40,000 for $50,000.The terms of the sale require the buyer to pay Pedro $10,000 at the closing of the sale and $20,000 per year for the next 2 years with interest at 7% on the unpaid balance.What is the proper amount of gain to be reported from the sale during each year Pedro receives payments?
$\begin{array} { l }& \text { Current } & \text { First } & \text { Second } \\&\text { Year } & \text { Year } & \text { Year }\\a.&\$2,000&\$4,000&\$4,000\\b.&\$10,000&\$-0-&\$-0-\\c.&\$-0-&\$4,000&\$6,000\\d.&\$3,333&\$3,333&\$3,334\\e.&\$-0-&\$-0-&\$10,000\\\end{array}$

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Definitions:

Demand for Wine

The quantity of wine that consumers are willing to purchase at various prices, reflecting the relationship between price and quantity demanded in the wine market.

Cournot Duopolists

Firms in a duopoly (a market dominated by two firms) that determine their output levels simultaneously, under the assumption that the other will not change theirs.

Imports

Goods or services brought into one country from another for the purpose of trade or sale.

Cournot Duopolists

A market structure in which two companies assume the other's output to be constant when determining their optimal production levels.