Question

Question 22 of 75. All of the following taxpayers would like to report a sale as an installment sale. Which of the following taxpayers may do so? Jorge, who sold his entire inventory valued at $15,000 to Quentin for $23,000. Quentin intends to pay him $8,000 per year for the next three years. O Rowland Rowland, who sold a backhoe to Thomas for $5.000. Thomas made two payments, one payment of $2,500 on February S. 2018, and one payment of $2.500 on December 15 2018 Rowland paid $6.000 for the equipment when it was new and had fully depreciated it before he sold it. Carolyn, who sold a rental condo for $120.000. She purchased it for $75,000 and had claimed $25,000 depreciation. Her buyer intends to pay $20,000 per year plus 6% interest for six years. U Elena, who sold a plot of land for $52.000. She purchased it for $33.000 and paid $22,000 for improvements, her boyo intends to pay for the land over five years. Mark for follow up

Answer 1

Subject olution Note i firstly we need to understand what is the difference between installment Sales and regular sales. motallment sale is a sales. which includes its payment in install- ment for longer period but the regular sales means credit sales allowed credit for shorter period.

Here Jorge sold inventry for $ 15000 but the payment received in matallment does not attract sales made on installment basis because sale of rentory means it will be taxable on same year so it will be regular credit sales.

In this case Rowland sold a backhoe to Thomas for $ 5000 doller but the pay- ment of such made in installment and ! the installment is not of longer period So Rowland should not record it as mstallment sale but as Regular credet sales. In the given situation Carolyn should Record this transaction as an installment sale because its payments are to be made in Long term yearly for next sixe yea54.

Here Elena sold which she will for the land over transaction will land for $ 52000 for receive payment in motallnet five years so the be regarded as matallment sale