In year 1, Aldo sold investment land with a $61,000 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.

a.	Compute Aldos recognized gain under the installment sale method in years 1 and 2.(Round gross profit percentage to 2 decimal places and final answer to the nearest whole dollar amount.)

b.

In year 4, Aldo pledged the note 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.(Round gross profit percentage to 2 decimal places and intermediate calculations to the nearest whole dollar amount.)