Pedro Sells Land That He Held as an Investment with a Basis

question 30

Multiple Choice

Pedro sells land that he held as an investment with a basis of $40,000 for $50,000.The terms of the sale require the buyer to pay Pedro $10,000 at the closing of the sale and $20,000 per year for the next 2 years with interest at 7% on the unpaid balance.What is the proper amount of gain to be reported from the sale during each year Pedro receives payments?
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Current First Second
Year Year Year

• A)$2,000 $4,000 $4,000
• B)​$10,000 $-0- $ -0-
• C)​$ -0- $4,000 $6,000
• D)​$ 3,333 $3,333 $3,334
• E)​$-0- $ -0- $10,000

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Definitions:

Housing Prices

The financial cost required to purchase residential properties; influenced by location, demand, and other economic factors.

Adjustable Rate Mortgages

A type of mortgage loan in which the interest rate can change over time, based on changes in a reference interest rate or index.

Expansionary Monetary Policy

A form of economic policy that aims to increase the money supply and reduce interest rates to stimulate economic growth.

Economic Stability

Economic Stability is a condition in which an economy experiences constant growth, moderate inflation, and low unemployment rates over time.