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

question 60

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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?


Definitions:

Hans Eysenck

A British psychologist known for his work in the fields of personality and intelligence.

Progressive Relaxation

A technique that involves tensing and then relaxing each muscle group in the body systematically to reduce stress and anxiety.

Psychoanalyst

A therapist who practices psychoanalysis, a method for treating mental disorders by investigating the interaction of conscious and unconscious elements in the mind.

Spontaneous Recovery

The reappearance of a previously extinguished response after a period of time without exposure to the conditioned stimulus.

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