Jay would like to know how the down payment and 1st installment using a SCIN 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 using the following formula:

Installment Payment ?

Less: Interest Income ?

Net

Less: Return of Basis ?

Realized & Recognized Long Term-Capital Gains

Calculate the tax treatment realized on the down payment using the following formula::

Down Payment ?

Less: Return of Basis ?

Realized & Recognized Long Term-Capital Gains

THANK YOU!