On September 1, of the current year, James, a cash basis taxpayer, sells his farm to Bill, also a cash basis taxpayer, for $100,000. James' basis in the farm is $65,000. The real property tax year is the calendar year. Real estate taxes on the property for the year are $3,650 and are payable in November of the current year. The sales agreement does not provide for apportionment of real estate taxes between the buyer and seller. Assume Bill Pays all of the real estate taxes in the current year. The effects of this sale structure will be:

taxes allocated to James taxes allocated to Bill Effect on James' gain