All of the Following Taxpayers Can Use the Installment Method

question 15

Multiple Choice

All of the following taxpayers can use the installment method to report gains from the sale of assets except:

• A)A taxpayer who sells a parcel of land used in his trade or business.
• B)A taxpayer who sells land he inherited from his father five years ago.
• C)A taxpayer who sells a large piece of manufacturing equipment on which he took a Section 179 deduction for the total cost two years ago when purchased.
• D)A taxpayer who sells a building used in his trade or business for five years that was depreciated using straight-line depreciation.

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Definitions:

Principal Amount

The original sum of money borrowed in a loan, or invested, on which interest is calculated.

Maturity

Maturity is the date on which the principal amount of a bond, loan, or other financial instrument is to be repaid in full to the investor or lender.

Stated Interest Payment

The amount of interest that a bond or loan promises to pay to its holder, usually expressed as an annual percentage of the principal.

Coupon

The interest rate paid by a bond, typically expressed as an annual percentage of the bond's face value.