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***** Scenario 3: Business Sale with Installment Payments and Recapture ...

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Accounting

*****
Scenario 3: Business Sale with Installment Payments and Recapture
Sole proprietor sells a business, including equipment, for $450,000.
Terms: $100,000 down payment, the rest over 5 years.
Adjusted basis in the business assets:
Land: $100,000
Equipment: $40,000(accumulated depreciation: $60,000)
Interest and Dividend Income: $500
Itemized Deductions: $15,000
Allowable deduction for self-employment tax: None
Calculate:
Gain on the sale, type of gain (ordinary, capital, recapture)
Taxable income recognized in the year of sale
AGI, Taxable Income, and Total Tax Liability for the year of sale

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