Todd,a CPA,sold Land for $200,000 Plus a Note for $400,000

question 25

Multiple Choice

Todd,a CPA,sold land for $200,000 plus a note for $400,000.The interest rate on the note was equal to the Federal rate.The fair market value of the note was $360,000.Todd's basis in the land was $75,000.

• A)If Todd uses the accrual basis to report the income from his practice,he cannot use the installment method to report the gain on the sale of the land.
• B)If Todd uses the cash basis to report the income from his practice,he cannot use the installment method to report the gain from the sale of the land.
• C)If Todd uses the installment method to report the gain,the contract price is $600,000.
• D)If Todd does not use the installment method,his gain in the year of sale is $125,000 ($200,000 - $75,000).
• E)None of the above.

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