Steve Drake sells a rental house on January 1, 2016, and receives $120,000 cash and a note for $45,000 at 10 percent interest. The purchaser also assumes the mortgage on the property of $35,000. Steve's original cost for the house was $180,000 and accumulated depreciation was $30,000 on the date of sale. He collects only the $120,000 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 in that year under the installment sale method.

$ ______________