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CCH Federal Taxation Basic Principles Chapter 11 Property Transactions: Nonrecognition of Gains and ... - page 60 / 66

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CCH Federal Taxation Basic Principles

60 of  66

Installment Method—Solution Step One

* (8% is by 2 because interest is compounded semi-annually.)

0

7,703

308

8,012

7,703

11/11/x4

7,703

7,408

604

8,012

15,111

5/11/x4

15,111

7,123

889

8,012

22,234

11/11/x3

22,234

6,849

1,163

8,012

29,083

5/11/x3

29,083

6,585

1,427

8,012

35,668

11/11/x2

35,668

6,332

1,680

8,012

42,000

5/11/x2

Loan End. Balance

Principal Payment

Interest

Income

Installment Received

Loan Beg. Balance

Payment Due Date

(e) =

(a) - (d)

(d) =

(b) - (c)

(c) =

(a) x (8% 2)*

(b)

(a)

STEP 1:  Allocate $8,012 installment payments between principal and interest.

($42,000 installment loan = $50,000 sales price - 8,000 down payment)

SOLUTION:

Chapter 11, Exhibit 22a

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