Juan, Not a Dealer in Real Property, Sold Land That

question 75

Multiple Choice

Juan, not a dealer in real property, sold land that he owned. His adjusted basis in the land was $700,000 and it was encumbered by a mortgage for $100,000. The terms of the sale required the buyer to pay Juan $200,000 on the date of the sale. The buyer assumed Juan's mortgage and gave Juan a note for $900,000 (plus interest at the Federal rate) due in the following year. What is the gross profit percentage (gain ÷ contract price) ?

• A) $700/$1,100 = 63.64%.
• B) $500/$1,200 = 41.67%.
• C) $700/$1,200 = 58.33%.
• D) $500/$1,100 = 45.45%.
• E) None of the above.