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:

Under the Influence

A state of being significantly affected by substances such as alcohol or drugs, usually impairing judgment or physical capabilities.

Alcohol

A psychoactive substance, specifically ethanol, commonly found in beverages like beer, wine, and spirits, and known for its effects on mood, behavior, and physical health.

Hurriedness

The state of doing something more quickly than usual, often under pressure.

Anxiety

A feeling of worry, nervousness, or unease about something with an uncertain outcome, often reflecting concern about a future event.