Jay would like to know how the down payment and 1st installment for the sale of his business will be treated for tax purposes. The business was sold 3 weeks ago to his son for $10,000,000. The terms of the agreement are: 20% down payment, 10-year, 4.5% note that will start paying quarterly on May 1, 2016. The tax basis is $4,245,000. Calculate the tax treatment realized on the 1st installment payment (round to the nearest dollar) with this formula:

Installment Payment

Less: Interest Income

Net

Less: Return ofBasis

Realized & Recognized Long-Term Capital Gain