Kay, who is not a dealer, sold an apartment house to Polly during the current year (2014). The closing statement for the sale is as follows:

                              

During 2014, Kay collected $9,000 in principal on the installment note and $2,000 of interest. Kay’s basis in the property was $110,000 [$125,000  $15,000 ðdepreciationÞ]. The Federal rate is 6%.

a. Compute the following:

1. Total gain.
2. Contract price.
3. Payments received in the year of sale.
4. Recognized gain in the year of sale and the character of such gain.

b. Same as (a)(2) and (3), except that Kay’s basis in the property was $35,000.