Kay, who is not a real estate dealer, sold an apartment house to Polly during the current year (2020). The closing statement for the sale is as follows.

Total selling price				$190,000
Add: Polly's share of property taxes (six months) paid by Kay				3,000
Less: Kay's 8% mortgage assumed by Polly		$55,000
	Polly's refundable binder ("earnest money") paid in 2019	1,000
	Polly's 8% installment note given to Kay	99,000
	Kay's real estate commissions and attorney's fees	8,000		(163,000)
Cash paid to Kay at closing				$30,000
Cash due from Polly = $30,000 + $8,000 expenses				$38,000

During 2020, Kay collected $9,000 in principal on the installment note and $2,000 of interest. Kay's basis in the property was $110,000 [$125,000 − $15,000 (depreciation)]. The Federal rate is 6%.

Hint: Think about the manner in which the property taxes are handled before you begin your computations.

When computing gross profit, round to six decimal places before converting to a percentage. For example: .683483333 would be rounded to .683483 and converted to 68.3483%. When required, round your final answers to the nearest dollar.

a. Compute the following.

• The total gain is $_72,000__

• The contract price is $__135,000_____

• Payments received in the year of sale total $_________________

• Recognized gain in the year of sale is $__________________, and the character of such gain is §_1231 gain_____.

b. Assume the same circumstances, except that Kay's basis in the property was $35,000. Compute the contract price and payments received in the year of sale.

• The contract price is $_____147,000___.

• Payments received in the year of sale total $_________________.