Question

Mason canceled a note issued by Emma (Mason’s niece) that arose in connection with the sale of property. At the time of the cancellation, the note had a basis to Mason of $30,000, a face amount of $55,000, and a fair market value of $42,000. Presuming that the initial sale by Mason qualified as an installment sale, how much gain does the cancellation result in for Mason?

Answer 1

gain on cancellation ids $25000

Step-by-step explanation:

given data

basis to Mason = $30,000

face amount = $55,000

fair market value = $42,000

to find out

how much gain on cancellation

solution

we get here gain that is express here as

gain = face amount - basis to Mason .............................1

put here value we get

gain = $55,000 - $30,000

gain = $25000

so gain on cancellation ids $25000