Chapter 17, Problem 50P

Jasmine owned rental real estate that she sold to her tenant in an instalment sale. Jasmine acquired the property in 2007 for $400,000; took $178,000 of depreciation on it; and sold it for $210,000, receiving $25,000 immediately and the balance (plus interest at a market rate) in equal payments of $18,500 for 10 years.

1. a. What is the nature of the recognized gain or loss from this transaction?
2. b. Assuming that the interest rate on the installment contract is 5%, what is the present value of the installment payments? See Appendix H for present value factors.