Question
Juan, who is not a dealer in real property, sold land that he owned. His adjusted basis in the land was $700,000 and it was
Juan, who is not a dealer in real property, sold land that he owned. His adjusted basis in the land was $700,000 and it was encumbered by a mortgage for $100,000. The terms of the sale required the buyer to pay Juan $200,000 in cash on the date of the sale. The buyer assumed Juans mortgage and gave Juan a note for $800,000 (plus interest at the applicable Federal rate) due in the following year. What is the gross profit percentage (gain divided by contract price)?
a. $700,000/$1,100,000 = 63.64%.
b. $500,000/$1,200,000 = 41.67%.
c. $700,000/$1,200,000 = 58.33%.
d. $500,000/$1,100,000 = 45.45%.
e. $400,000/$1,000,000 = 40%.
Step by Step Solution
There are 3 Steps involved in it
Step: 1
Get Instant Access to Expert-Tailored Solutions
See step-by-step solutions with expert insights and AI powered tools for academic success
Step: 2
Step: 3
Ace Your Homework with AI
Get the answers you need in no time with our AI-driven, step-by-step assistance
Get Started