Verlin sells a commercial building and receives $50,000 in cash and a note for $60,000 at 10 percent interest. Verlin's adjusted basis in the building on the date of sale is $45,000 and he collects only the $50,000 down payment in the year of the sale.
a. If Verlin elects to recognize the total gain on the property in the year of sale, calculate the taxable gain.
b. If Verlin uses the installment sale method, calculate the taxable gain he must report for the year of sale.
c. If Verlin collects $10,000 (not including interest) of the note principal in the year following the year of sale, calculate the amount of income recognized under the installment sale method.