Calculation of Gain or loss, Installment Sales (LO 1.8, 8.10) Steve Drake sells o rental house on January 1, 2020, and receives 590,000 cash and a note for $55,000 at 7 percent interest. The purchaser also assumes the mortgage on the property of $30,000. Steve's original cost for the house was $172,000 on January 1, 2012 and accumulated depreciation was $32,000 on the date of sale. He collects only the 590,000 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 goin b. Assuming Steve uses the installment sale method, complete Form 6252 for the year of the sale. Iran amount is zero, enter "O". Enter all amounts as positive numbers. Round all decimals to three places and any dollar amount to the nearest dollar Form 6252 Installment Sale Income OMB No 1545-0228 Attach to your tax return 2020 Use a separate form for each sale or other disposition of property on the installment Department of the Treasury Internal method Attachment Revenue Service Go to www.irs.gov/Form 6252 for the latest Information. Sequence No. 79 Name(s) shown on return Identifying number Steve Drake 1 Description of property Date sold Previous Next 5 5 6 7 Selling price including mortgages and other debts. Don't include interest, whether stated or unstated Mortgages, debts, and other liabities the buyer assumed or took the property 6 subject to see instructions) Subtract line from line 5 7 Cost or other basis of property sold 8 Depreciation allowed or allowable 9 Adjusted basis. Subtract line 9 from line 8 10 8 9 10 11 Commissions and other expenses of sale 11 12 12 Income recapture from Form 4797, Part III (see instructions) 13 Add tines 10, 11, and 12 13 14 14 15 15 Subtract line 13 from line 5. If zero or less, don't complete the rest of this form. See Instructions Ir the property described on line 1 above was your main home, enter the amount of your excluded gain See instructions. Otherwise, enter -- Gross prorit. Subtract ne 15 from line 14 Subtract line 13 from line 6. If zero or less, enter-O- 16 16 17 17 18 Contract price. Addine 7 and line 17 18 Part IT Part II Installment Sale Income. Complete this part for all years of the installment agreement 19 19 20 20 22 Gross pront percentage (expressed as a decimal amount). Divide line 16 by line 18. (For years after the year or sale, see instructions) If this is the year of sale, enter the amount from line 17. Otherwise, enter-O- 21 Payments received during year (500 Instructions). Don't include interest, whether stated or unstated 21 22 Add lines 20 and 21 23 Payments received in prior years (see Instructions). Don't include Interest, 23 whether stated or unstated 24 Installment sale income. Multiply line 22 by ine 19 25 Enter the part or line 24 that is ordinary income under the recapture rules. See Instructions 25 Subtract line 25 from Iine 24. Enter here and on Schedule D or Form 4797. Sed instructions Part IIX Related Party Installment Sale Income. Don't complete if you received the final payment this tax year 27 Nome, address, and taxpayer identifying number of related party 24 26 26 28 Did the related party resell or dispose of the property ("second disposition") during this tax year? Yes No 29 If the answer to question 28 Is "Yes," complete lines 30 through 37 below unless one of the following conditions is met Check the box that applies The second disposition was more than 2 years after the first disposition (other than dispositions of marketable securities). If this box Cine second osposidon was an involuntary conversion on the threat or conversion occurrenter the ist disposition d The second disposition occurred after the death of the original seller or buyer It can be established to the satisfaction of the IRS that tox avoidance wasn't a principal purpose for either of the dispostions. In this box is checked, attach an explanation. See instructions 30 Selling price of property sold by related party (see instructions) 30 31 Enter contract price from line 18 for year of first sale. 31 32 Enter the smaller of line 30 or line 31 32 33 Total payments received by the end of your 2020 tox year(see instructions) 33 34 Subtract line 33 from line 32. If zero or less, enter-0- 34 35 Multiply line 34 by the gross profit percentage on line 19 for yoar of first sale Enter the part of line 35 that ordinary income under the recapture rules. See Instructions 36 37 Subtract line 36 from line 35. Enter here and on Schedule D or Form 4797. See instructions 37 For Paperwork Reduction Act Notice, see page 4 Cat No. 1360IR Form 6252 (2020) 36 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 sole method Round your answer to the nearest dollar