I:11-45 Installment Sale. Ace Construction Company sells a used crane to Go Construction for

$80,000. The crane, which originally cost $900,000, is fully depreciated. Under Sec. 1245 depreciation recapture rules, the entire gain is taxable as ordinary income. Ace receives a down payment of $20,000 and is to receive $20,000 per year for three additional years plus interest of 8%, which is greater than the applicable federal rate.

a. Compute the gain from the sale.

b. How much gain is taxable in the year of the sale?

c. What income does Ace report in each of the next three years?