1. A taxpayer holds an installment obligation calling for a payment of $15,000. The gross profit percentage on the original installment sale was 80%. What is the adjusted basis of the installment obligation?
2. Suppose the taxpayer in the previous example gives the installment obligation to his daughter. What are the tax consequences if any to the father?
3. The taxpayer sells a painting for $10,000 in which he had an adjusted basis of $1,500. There were no selling expenses. $3,000 was paid in year one and $7,000 was to be paid in year 2. The buyer defaulted on the year 2 payment and the seller repossessed the painting. The cost of the repossession was $500. The value of the painting at the time of repossession was $11,000. What are the tax consequences to the original seller?
4. Suppose the taxpayer in the previous example gives the installment obligation to his daughter. What are the tax consequences if any to the father?