On July 1, 2018, Jones sold new property to Harold, Inc. in exchange for a debt instrument with a stated principal amount of $3,000,000 and a stated redemption price at maturity of $3,000,000. The debt instrument call for interest payments at the rate of 4% per annum, payable semiannually. The debt instrument was to be redeemed on June 30, 2024. Interest payments of $60,000 were due on June 30th and December 31st during the term of the instrument. Neither the debt instrument nor the property was publicly traded. At the time of the sale the applicable federal rate (AFR) was equal to 5%, and the present value of all payments to be received on