Malea sold a machine for $140,000. The machine originally cost $90,000 and $10,000 of MACRS depreciation had been allowable. The buyer assumed an existing loan of $40,000, paid $20,000 cash down and agreed to pay $10,000 per year for eight years plus interest. Selling expenses are $10,000. The contract price is
A) $40,000.
B) $80,000.
C) $100,000.
D) $130,000.
C) $100,000.
The contract price is the greater of (1) the gross profit on the sale or (2) the selling price reduced by the existing mortgage assumed by the buyer:
(1) Gross profit on sale—$140,000 selling price less $10,000 selling expenses less $10,000 depreciation recapture less adjusted basis of $80,000 = $40,000.
(2) Selling price less mortgage assumed by buyer : $140,000 - $40,000 = $100,000.
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