Juan, who is not a dealer in real property, sold land that he owned. His...
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Juan, who is not a dealer in real property, sold land that he owned. His adjusted basis in the land was $700,000 and it was encumbered by a mortgage for $100,000. The terms of the sale required the buyer to pay Juan $200,000 in cash on the date of the sale. The buyer assumed Juans mortgage and gave Juan a note for $800,000 (plus interest at the applicable Federal rate) due in the following year. What is the gross profit percentage (gain divided by contract price)?
a. $700,000/$1,100,000 = 63.64%.
b. $500,000/$1,200,000 = 41.67%.
c. $700,000/$1,200,000 = 58.33%.
d. $500,000/$1,100,000 = 45.45%.
e. $400,000/$1,000,000 = 40%.
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