Steve Drake sells a rental house on January 1, 2012, and receives $130,000 cash and a note for $55,000 at 10 percent interest. The purchaser also assumes the mortgage on the property of $45,000. Steve's adjusted basis in the house on the date of sale is $152,500, and he collects only the $130,000 down payment in the year of sale.

a. If Steve elects to recognize the total gain on the property in the year of sale, calculate the taxable gain. $_______________

b. Assuming Steve uses the installment sale method, complete Form 6252 on page 8-49 for the year of the sale.

c. Assuming Steve collects $5,000 (not including interest) of the note principal in the year following the year of sale, calculate the amount of income recognized under the installment sale method. $_______________

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SCHEDULE D Form 1040) OMB No. 1545-0074 Capital Gains and Losses Attach to Form 1040 or Form 1040NR. See Instru tions for Schedule D Form 10401. Use Form 8949 to list your transactions for lines 1,2,3, &,s, and 10 Name) shown Your soclal security numbar PartI Short-Term Capital Gains and Losses-Assets Held One Year or Less Complete Forrn 8949 before completing line 1, 2, or 3. whole dolars. (e) Salas prioe tromnrAdiustments 1 This form may be easier to complete if you round off cents to 1 Short-term totals from all Forms 8949 with box A 2 Short-term totals from all Foms 8949 with box B 3 Short-term totals from all Foms 8949 with box C Form) 8849 checked in Partl checked in Part I checked in Part l 4 Short-term gain from Form 6252 and short-term gain or (loss) from Forms 4684, 6781, and 8824 5 Net short-term gain or )from partnerships, S corporations, estates, and trusts from 6 Short-term capital loes carryover. Enter the amount, if any, from ine 8 of your Capital Loss Carryover 7 Net short-term capital gain or (loss). Combine lines 1 through 6 in column h). If you have any Worksheet in the instructions term capital or losees, go to Part below. Otherwise, go to Part Ill on the back PartILong-Term Capital Gains and Losses-Assets Held More Than One Year Complete Forrm 8049 before completing lina 8, 9, or 10 This form may be easier to complete if you round off cents to Forni, 9鳳 akspios from or other basls 9) Ajutments to h) Gain or Form) 80449 whole dol lars. 8 Long-term totals from all Forms 8949 with box A 9 Long-term totals from al Forms 8949 with box B 10 Long-term totals from all Forms 8949 with box C 11 Gain from Form 4797, Part E; long-lerm gain from Forms 2439 and 6252; and long-term gain or loss) checked in Part checked in Part I checked in Part 1 from Forms 4684, 6781, and 8824 12 Net long-term gain or (0oss) from partnerships, S corporations, estates, and trusts from Schedula(s) K-1 12 7 Net short-term capital gain or (loss). Combine lines 1 through 6 in column h). If you have any term capital or losses, go to Part E below, Otherwise, go to Part Ill on the back PartILong-Term Capital Gains and Losses-Assets Held More Than One Year Complete Forrm 8049 before completing lina 8, 9, or 10 This form may be easier to complete if you round off cents to Fm ne ()Sakes prios fhom n Cost or otherbasisgoin or loas from h) Gain or whole dol lars. 8 Long-term totals from all Forms 8949 with box A checked in Part II 9 Long-term totals from al Forms 8949 with box B checked in Part I 10 Long-term totals from all Forms 8949 with box C n Part 11 Gain from Form 4797, Part E; long-lerm gain from Forms 2439 and 6252; and long-term gain or loss) from Forms 4684, 6781, and 8824 12 Net long-term gain or (loss) from partnerships, S corporations, estates, and trusts from Schedula(s) K-1 12 13 Capital gain distributions. See the instructions 13 14 Long-terrm capital loss carryover. Enter the amount, if any, from line 13 of your Capital Loss Carryover Workshoot in the instructions 14 15 Net long-term capital gain or (loss). Combine lines 8 through 14 in cokumn . Then go to Part ill on the back 15 For Papensork Reduction Ant Notice, see your taxr return instruntiong 16 Combine lines 7 and 15 and enter the reault 16 If line 16 is a gain, enter the amount from line 16 on Form 1040, line 13, or Form 1040NR, line 14. Then go to line 17 below ine 22, 1040NA, line 14.Then go to line 22 If line 16 is a loss, skip lnes 17 through 20 below. Then go to lina 21. Also be sure to complate If line 18 is zero, skip lines 17 through 21 below and enter -D- on Form 1040, ine 13, or Form 7 Are lines 15 and 16 both gains? Yes. Go to line 18. No. Skip lnes 18 through 21, and go to line 22. 18 Enter the amount, if any, from line 7 of the 28% Rate Gain worksheet te instructions 19 Enter the amount, if any, from line 18 of the Unrecaptured Section 1250 Gain Worksheet in the 20 Are lines 18 and 19 both zaro or blank? Yes. Complete Form 1040 through line 43, or Form 1040NR through line 41. Then complata the Qualified Dividends and Capital Gain Tax Worksheet in the instructions for Form 1040 ine 44 (or in the instructions for Form 1040NR, line 42) Do not complete lines 21 and 22 below No. Complete Form 1040 through line 43, or Form 1040NR trough line 41 . Then complete the Schodule D Tax Worksheet in the instructions. Do not complete lines 21 and 22 below. 21 If line 16 is a loss, enter here and on Form 1040, line 13, or Form 1040NR, line 14, the smaller of 21 The lcss on line 16 or $3,000), or if married filing separately, (S1,500) Note. When figuring which amount is smaler, treat both amounts as positive numbers. 22 Do you have qualified dividends on Form 1040, line 9b, or Form 1040NR, line 10b? Yes. Complete Form 1040 through line 4a or Form 1040NR through line 41. Then complete the Qualified Dividends and Capital Gain Tax Worksheet in the instructions for Form 1040 ine 44 for in the instructions for Form 1040NR, line 42). No. Complete the rest of Form 1040 or Fom 1040NR. Schedale D (Fom 10401 2011 m8949Sales and Other Dispositions of Capital Assets MB No. 1545-0074 See Instructions for Schodule D (Form 1040) For more information about Form 8049, so www.irs.gowfomas49 Attaoh to Sahedule D to Est your transaations for lines 1,2,3,8, 9, and 10 2011 Anachrontio 12A Departnent of the Tsoaury Atachment Namals) shewn on retum Part I Short-Term Capital Gains and Losses-Assets Held One Year or Less Note: You must check one of the boxes below. Complete a separate Form 8949, page 1, for each box that is checked. Caution. Do not complete column (o) or (o until you have read the instructions for thoee columns (see the Instructions for Schedue D (Form 1040 Columns (b) and ig) do not apply for most transactions and should generally be left blank (A Short-tem transactions reported on (B) Short-term transactians reported on Form(C) Short-term transactions for which Form 1099-B with basls to the IRS 1099-B but basis not reported to the IRS you canot check box A or B İd) gl Description of property Code, i any De acquired Sales price ost or otherbas Adments to 2 Totals. Add the amounts in columne (e) and (), Also, combine the amounts in column g) Enter here and include on Schedule D, ine 1 ( box A above is checked), line 2 (if box B above is checked), or line 3( For Paperwork Reduction Ast Notice, 9ee your taw robum Instructions Frm 8949 p Form 8049 2011) Namers shown on reum Do natenter name and soclal security number It shown on other side. ttachment Sequerce No.12A e2 Your soclal security number Part I Long-Term Capital Gains and Losses-Assets Held More Than One Year Note: You must check one of the boxes below. Complete a separate Fom 8949. page 2, for each box that is checked. Coution. Do not complete column (b) or (g) until you have read the instructions for those columns (see the Instructions for Schedule D (Form 1040) Columns (o) and ig) do not apply for most transactions and should generally be left blank. 〇㈥ Long-term rans cto s reported on 。(E Long-term transactions reported on Form C) Long term transactions or which Form 1099-B with basis reported to the IRS 1099-B but basis rot reported to the IRS you cannot check box A or B . Dssaription of Examoles 100 4 Totals. Add the amounts in columns (e) and (. Also, combine the amounts in column gl Enter here and include on Schedule D, line 8 (t box A above is checked), line 9 f box B above is checked), or line 10 Fom 4797 Sales of Business Property OMB No. 1545-0184 Conversions and Recapture Amounts 2012 (Also Involu Under s 179 and 280F(b(2)) Attach to your tax return. Information about Form 4797 and its separate instruetions is at Sequenoe No. 27 Enter the gross proceeds from sales or exchanges reported to you for 2012 an Forms)1 substitute statemen) that you are including on ine 2,10, or 20 (see instructions). (or Part Balco or Exchongcs of Property Used in a Trade or Buaincss and Involuntary Converaiong From Other Than Ca or Theft-Most Held More Than 1 Year )Deprecaton Cost or other Date acquired mo, day. y Dbld mo, dayT 1쨔 Description sales price 3 Gain, H any,from Fom 4684, line 3 4 Section 1231 gain from instailment sales from Form 6252, line 26 or 37 5 Section 1231 gain or (losa) from like-kind exchanges from Form 6 Gain, i any, from ine 32, from other than casuaty oe thett Combine lines 2 through &Enter the gain ar oss) hare and an the appropriate line as Partnerships (except electing large partnershipe) and S corporations Repert the gain or (loes) folowing the instructions for Form 1086. Schedule K, ine 10. or Form 1 1 20S, Schedule K. line 9. Skip ines 8.9, 1 1 . and 12 below. Individuals, partners, S corporation shareholders, and all others. If ine 7 a zero or a loss, enter the amount trom line 7 on line 11 below and skip lines 8 and 9, I ine 7 is a gsin and you did not have any prior yer section 1231 losses, or they were recaptured in an earier yer, enter the gain from line 7 as & long-tem cspital gain on the Schedule D filed with your retum and skip lines 8, 9, 11, and 12 below, 8 Nonrecaptured net section 1231 losse8 from prior yeara fsee instructions Subtract line 8 from line 7.H zero or less, enter-0-line 9 is zero, enter the gain from line 7 on ine 12 below. If line 9 is more than zero, enter the amount from ine 8 on line 12 below and enter the gain from line 9 as a long-term cital gain on the Schedde D fied with your retum Ordinary Gains and Losses (see instruction 10 Ordinary gains and losses not included on Iines 11 through 16 (include property held 1 year or laas 11 Loes, if any, from ine 12 Gain, it any, from ine 7 or amount from Ine B, it appicab 3 Gain, if any, from ine 31 14 Net gain or (os8) from Form 4884, ines 31 and 38a 15 Odinary gain from instalment sales trom Form 6252, ine 25 or 36 16 Ordinary gain or 0ossi from lke-kind exchanges from Form 8824. 17 Combine ines 10 through 16 18 For al axoept individual retums, anter the amount from ine 17 on the appropriate ine of your raturn and skip lines a 13 and b bolow. For indvidual rotums, complate lines a and b belo a If the loss on ine 11 includes a loss from Form 4684, ine 35, column(0), enter that part of the koss here. Enter the part or The Ironi ineone.proaeng pepery on sena ulé A lHorm 104UL îna 28, ard tné part or tre Ke4 บ0m property usad as an amployae on Schadule A Fom 1040, ina 23. Idantty aa fram "Fom 4797, ine 18a Sae instructions b Redetermine the gain or floss) on line 17 eechoing the loss, if ry, on line 188, Enter here nd on Form 1040, ie 14 For Paperwork Reduction Act Notice, see separate instructions. | 18b Fom 4797 2012 4797 2012 Page 2 Gain From Disposition of Property Under Sections 1245, 1250, 1252, 1254, and 1265 see 19 a) Description of section 1245, 1250, 1252, 1254, or 1255 property day. yr Property A Property BProperty Property D 20 Gross sales price Note: See ine T betore completing) 21 Coat or other basis plus expense of sale 22 Depreciation (or depletion) allowed or alowable 23 Adjusted basis. Subtract ine 22 from line 21 24 Total gain. Subtract ine 23 from Iine 2 section 1245 property: a Dapreciation allowed or alowable from line 22 b Emerthe Bmaller ơfine 24 or 25a ฮ Additional depreciation after 1975(beerstructns b Applcable percentage mutipled by the smaller of line 203 4 or ine 26a see instructions c Subtract ine 26a from line 24, If residential rental property or l¡าค 24 is not more than ine 26a, skip Ines 25d and 260 d Additional depreciation after 1969 and belore 1978 e Enter the smaller of ine 20c or 20d f Secton 291 amount (corporations only) 260 2ed Add ines 26b, 20e, and 20f 27 section 1252 property: Skip this ยectonf you did not dispose of familand or it this form is being completed for a partnership other thn sn electing lange partnershp a Sol, water, and land clearing expences b Line 27amultiplied by applicable parcantage lace instructione 27b c Enter the smaller of ine 24 or 27b 27e 28 section 1254 property ฮ intangible ding and development osts, expenditures or development of mines and other natural deposits, mining exploration costs, and depleton (e b Enter the smaller of ine 24 or 28a 29 It section 12s5 property a Applicable percentage of payments excluded from ncome under section 126 (ee instructions) b Enter the smaller of ine 24 or 29a (pee 283 of Part Ill Gains. columns A h line 29b before to line 30 30 Total gains for all properdes. Add property columns A through D, line 24 31 Add property oolumns A through D, ines 2%, 26g, 27, 28b, and 29b. Enter hore and on line 13 32 Subtract line 31 from ine 30 Enter the, porticr"om casualty or theft on Form 4684, lne 33, Enter the portion from other than or theft on Form 4797, Ine Fcom 6252 Installment Sale Income OMB No 1545-0228 Attach to your tax return. Use . separate form for each sale or other disposition of property on th* inataliment fsetod Instruotions and move are at www.IRS goviform6252 2012 Dep uten of Ire Traury | Namao shown on reb danifying aumber 1 Description of property Land 2a Date acquired (mmody 3 Was the property sold to a related party (pee instructione) after May 14,19802 If "No," skip line 4..YesNo b Date sold (mmddl 4 Was the property you sold to a related party a marketable security? Ir Yes" complete Part IL. It "No camplete Part IlIl for the year of sale and the 2 years after the year of sale PartGross Profit and Contract Price. Complete this part for the year of sale only 6 Seling price including mortgages and cther debts. Do not include interest, whether stated or utaed 6 Mortgages, debts, and other liabilities he buyer assumed or took the 5 proparty subject to (see instructions) Subtract line 6 from line 5 9 Depreciation allowed or alowable 10 Adjusted basis.Subtract line 9 from line B 11 Commissions and other expenses of sale 12 Income recapture from Form 4797, Part II (see instructions 13 Add lines 10, 11, and 12 14 Subtrect line 13 from ine 5. If zero or less, do not complete the rest of this form (see instructions) 14 15 If the property desaribed on line 1 above was your main home, enter the amount of your excluded gain (see instructiona). Otherwise, enter-0 16 Gross profit. Subtract line 15 from line 14 1 Subtract line 13 from ine &. If zero or less, enter -0 8 Contract price. Add line 7 and ine 17 Part Il 16 Installment Sale Income. Complete this part for the year of sale and any year you receive a payment or have certain debts you must treat as a payment on installment obligation 19 Gross profit percentage (expressed as a decimal amount. Divide ine 16 by line 18. For years atter e year of sale, see instructons 20 Ir this is the year of sale, enter the amount from line 17. Otherwise, enter-0 21 Payments received during year (ee instructions). Do not include interest, whether stated or unstated 2 22 Add lines 20 and 21 23 Payments received in prior years (see instructions). Do not include interest, whether stated or unstated 24 24 Instalment sale income. Muttiply line 22 by line 19 25 Enter the part of line 24 that is ordinary income undar the recapture rules(ee instructions 28 Subtract line 26 from ine 24. Enter here and on Schedule D or Form 4797 see instructions Part I Related Party Installment Sale Income. Do not complete if you received the final payment this tax year 27 Name, address, and taxpayer identiying number of related party 28 Did the relatad party rasal ar disposa o tha property(send dsposition') during this tax yaar? 2 Ithearswer to question 28 is"Yes, complete lines 30 through 37 below unless one of the following conditions is met. Check the box that apple Yee No a □ The second disposition was more than 2 years aber te firat daposition (other han dispostiena of marketable securities. If this bax is checked, enter the date of disposition (mmiddyyry) b The first disposition was a sale or exchange of stock to the issuing corporation □ The second dispositon was an involuntary conversion and the threat of conversion occurred ater the first deposition c d The sacond disposition oocurrod aftor the doath of tha original scllar or buyor e □ It can be establisned to the atsaction of the IRS that tax avoidance was not a principal purpose for either or the dispositions. If this box is checked, attach an explanation (see instructions) Part Ill Related Party Instaillment Sale Income. Do not complete if you received the final payment this tax year. 27 Name, address, and taxpayer identilying number of related party 28 Did the nalatad party rasal ar disposa of tha proparty (second dikposition') during this tax yaar? 2 Ithearswer to question 28 isYes complete lines 30 through 37 below unless one of the tollowing conditions is met. Check the box that apples a The secand disposition was mone than 2 years ater the first dspesitian (other than dispostions of marketable securities If this bax is checked, enter the date of disposition (mmiddyyy) b The first disposition was a sale or exchange of stock to the issuing corporation □ The second disposition was an involuntary conversion and the threat of conversion occurred ater the first deposition d с The sacond disposition oocurrod aftor the doath of tha original scllar or buyor e □ It can be establisred to the atsfaction of the IRS that tax avoidance was not a principal purpose for either of the dispositions. If this box is checked, attach an explanation (see instructions) 30 Seling price of property sold by related party (see instructions) 31 Enter contract price from ine 18 for yeer of first sale 32 Enter the smaller of line 30 or line 31 33 Total payments roooivod by the and of your 2012 tax yoar (soo instructions) 34 Subtract line 33 from Ine 32. If zero or less, enter-0 35 Mulpy line 34 by the groee profit percertage on line 19 for year of firet sale 38 Enter the part of line 35 that is ardinary income under the recapture rules (see instructions) 32 For Panerank Reduntion Act Notice, saoe 4 Fm 8252 n1)