Oliver, a widower who does not live in a community property state, sold 50 acres of land he and his wife had paid $10,000 for in 1999. She died in 2009. As of the date of her death, the land was valued at $50,000 for estate tax purposes. Oliver sold the land for $100,000 on an installment basis. What is his gross profit percentage?

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Business

Alisson Mcbride

Yesterday, 16:26

Oliver, a widower who does not live in a community property state, sold 50 acres of land he and his wife had paid $10,000 for in 1999. She died in 2009. As of the date of her death, the land was valued at $50,000 for estate tax purposes. Oliver sold the land for $100,000 on an installment basis. What is his gross profit percentage?

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June Gamble · Answer 1

The options are given below:

A. 50%

B. 60%

C. 70%

D. 80%

The correct option is C.

Explanation:

From the question above, we are asked to calculate Oliver's gross profit percentage.

Gross profit percentage is calculated by dividing the gross profit made from the sale by the contract price. Gross profit is calculated by subtracting the installment sale basis from the selling price. Contract price refers to the total of all the principal payments that are to be received on the installment sale.

Oliver's adjusted basis at the time of sale is:

$30,000 ($5,000 +.50 ($50,000))

His gross profit percentage is:

70% [ ($100,000 - $30,000) : $100,000].