Taylor sold a capital asset on the installment basis for $1 million in total payments and did not charge interest on the deferred payment due in three years. The sale generated a gain that Taylor reported using the installment method.

a.         Interest will be imputed, thus increasing the total gross income from the transaction.

b.         Interest will be imputed, thus decreasing the total gross income from the transaction.

c.         Interest will not be imputed because the contract is for less than five years.

d.         Interest will be imputed, decreasing the capital gain from the transaction but not affecting the total gross income from the transaction.

e.         Interest will be imputed, thus increasing the buyer’s basis in the asset.