2. Thirty years ago, Ian purchased a 1,000-acre farm located in the central valley of California. Ian paid $100,000 cash ($100 per acre) for the property. Twenty years ago, after years of drought and frost, Ian attempted to sell his farm. Ian advertised the property in local newspapers but did not receive any offers. Ten years ago, Ian attempted to sell a portion of his property. Ian subdivided 500 acres of his farmland into 20 lots. He also spent $600,000 improving the property: clearing, grading, and installing utilities. Ian financed the improvements by borrowing $600,000 from Bank, securing the loan by the 500 acres with adequate stated interest. Ian advertised the property and sold 10 lots in 10 separate sales over the next three years. In the current year, Ian was approached by Developer who offered to pay Ian $2,000,000 ($1,400,000 plus the assumption of the $600,000 mortgage) for the remaining 10 lots (AB = $500,000). Developer agreed to pay Ian $200,000 cash in the current year and the additional $1,200,000 to be paid $300,000 per year for the next four years. The Developer's promissory note was secured by the property with adequate stated interest. Ian accepted the offer immediately. a. What is the character of the gain from the sale of the first 10 lots over a 3-year period? What is the character of the gain from the sale of the final 10 lots during the current year?