On September 2, of this year, Keshawn sold land to Rex, his nephew, for $400,000. Keshawn's basis in the land was $100,000. Rex agreed to pay his uncle $40,000 this year, and $60,000 each year for the next six years plus interest. One month later, Rex sold the land to Theo, an unrelated party, for $450,000. Based on this information, Keshawn must report
A) $0. Rex reports gain of $300,000.
B) gain of $225,000 this year.
C) gain of $225,000 this year plus interest in following six years.
D) gain of $30,000 this year, and gain in each of the following six years of $45,000 plus interest.
D) gain of $30,000 this year, and gain in each of the following six years of $45,000 plus interest.
A nephew is not considered a related person. Calculation of gain under installment sale rules does not change for Kevin as a result of nephew's resale of land.
$40,000 × .75 = $30,000
$60,000 × .75 = $45,000
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