On 3/1/X1, Sam (a calendar year taxpayer) decides to sell manufacturing equipment the he held for use in business in an installment sale. Sam purchased the equipment years ago for $100,000. His adjusted basis in the equipment is $72,000. Greg agrees to sell the property for four equal payments of $32,000 - one upfront payment and the other three payments to be received on 12/31/X1, 12/31/X2 and 12/31/X3.

Required: Answer the questions, below. Provide computations with labels.

a) What amount of gain is realized on the sale in X1?

b) What amount of gain is recognized in X1?

c) What is Sam's basis in the note receivable at the end of X2?