Pedro,not a Dealer,sold Real Property That He Owned with an Adjusted

question 24

Multiple Choice

Pedro,not a dealer,sold real property that he owned with an adjusted basis of $120,000 and encumbered by a mortgage for $56,000 to Pat in 2014.The terms of the sale required Pat to pay $28,000 cash,assume the $56,000 mortgage,and give Pedro eleven notes for $12,000 each (plus interest at the Federal rate) .The first note was payable two years from the date of sale and each succeeding note became due at two-year intervals.Pedro did not "elect out" of the installment method for reporting the transaction.If Pat pays the 2016 note as promised,what is the recognized gain to Pedro in 2016 (exclusive of interest) ?

• A)$12,000
• B)$7,200
• C)$4,800
• D)$0
• E)None of the above

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