$*****$

Scenario $3$: Business Sale with Installment Payments and Recapture

Sole proprietor sells a business, including equipment, for $$450,000.$

Terms: $$100,000$ down payment, the rest over $5$ years.

Adjusted basis in the business assets:

Land: $$100,000$

Equipment: $$40,000($accumulated depreciation: $$60,000)$

Interest and Dividend Income: $$500$

Itemized Deductions: $$15,000$

Allowable deduction for self$-$employment tax: None

Calculate:

Gain on the sale, type of gain $($ordinary$,$ capital, recapture$)$

Taxable income recognized in the year of sale

AGI, Taxable Income, and Total Tax Liability for the year of sale