In year 1, Aldo sold investment land with a $100,000 tax basis for $95,000. Payment consisted of $15,000 cash down and the purchasers note for $80,000. The note is being paid in 10 annual installments of $8,000, beginning in year 2.

Required:

a. Compute Aldos recognized loss in year 1.

Recognized Loss: ?

b. In year 4, Aldo pledged the note received from the purchaser as partial collateral for a $75,000 bank loan. The unpaid principal at date of pledge was $56,000. Determine the tax consequences of this pledge to Aldo.

	Amount
Aldo's basis in the installment note at the date of sale	?
Gain recognized on pledge of note	?