Kyle sold land on the installment basis for $100,000. His basis in the land was $70,000. Kyle received a $40,000 down payment and a real estate installment sale contract calling for $60,000 in additional payments in future years. In addition, Kyle paid $6,000 in commissions on the sale. What is the gross profit to be recognized in the current year?
A) $0
B) $9,600
C) $12,000
D) $24,000
B) $9,600
Gross profit is $24,000 ($100,000 - $70,000 - $6,000). Contract price is $100,000. Profit percentage is 24% ($24,000 /$100,000). Cash collected $40,000 × .24 = $9,600.
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