Pedro, Not a Dealer, Sold Real Property That He Owned

question 90

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 2015. 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 2017 note as promised, what is the recognized gain to Pedro in 2017 (exclusive of interest) ?

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

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Definitions:

Kyphosis

A condition characterized by an excessive outward curvature of the spine, leading to a hunchback or slouching posture.

Lordosis

A curvature of the spine resulting in an exaggerated inward curve, typically in the lower back, leading to a distinctive posture.

Cervical Bones

Refers to the seven vertebrae in the neck that make up the upper part of the spinal column.

Lumbar

Relating to the lower part of the back.