Arnold gave land to his son, Bruce. Arnold\'s basis in the land was $100,000, an

Question

Arnold gave land to his son, Bruce. Arnold's basis in the land was $100,000, and its fair market value at the date of the gift was $150,000. Bruce borrowed $130,000 from a bank that he used to improve the property. He sold the property to Della for $360,000. Della paid Bruce $90,000 in cash, assumed his $120,000 mortgage, and agreed to pay $150,000 in two years. Bruce's selling expenses were $10,000. Della is going to pay adequate interest.

Compute the following amounts:

a.   Bruce's basis in the land at the time of the sale is $ .................. .

b.   When computing his realized gain, what amount does Bruce use as the selling price and as the contract price?
Selling price: $.....................
Contract price: $.....................

c.   Bruce's total realized gain on the sale is $...................., but his recognized gain in the year of the sale is $..................

Explanation / Answer

a.   Bruce's basis in the land at the time of the sale is $ 230,000. .

b.   When computing his realized gain, what amount does Bruce use as the selling price and as the contract price?
Selling price: $360,000.
Contract price: $240,000.

c.   Bruce's total realized gain on the sale is $120,000 but his recognized gain in the year of the sale is $45,000

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