Individual Income Taxes
43rd Edition
ISBN: 9780357109731
Author: Hoffman
Publisher: CENGAGE LEARNING - CONSIGNMENT
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Chapter 18, Problem 16DQ
To determine
Explain why a seller and not a buyer should be more concerned about the stated interest rate.
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Assume that you are about to sell property (a vacant parcel of real estate) you own but otherwise have no use for. The net-of-sales-
commission selling price for the property is $470,000. You are willing to finance this transaction over a 19-year period and have told
the buyer that you expect a 9% pretax return on the transaction. The buyer has asked you for a payment schedule under several
alternatives.
Required:
1. What will be your periodic cash receipt, to earn a 9% return, if payments are received from the purchaser:
NOTE: to answer the above questions, use the PMT function in Excel, as follows:
PMT(rate,nper.pv.fv.type)
where: rate is the interest rate for the loan, nper is the total number of payments, pv is the present value (ie.. the total amount that a
series of future payments is worth now, also known as the principal), v is the future value (or a cash balance you want to attain after
the last payment is made; if fvis omitted, it is assumed to be 0 (zero)), and type is the…
Assume that you are about to sell property (a vacant parcel of real estate) you own but otherwise have no use for. The net-of-sales-
commission selling price for the property is $450,000. You are willing to finance this transaction over a 14-year period and have told
the buyer that you expect a 11% pretax return on the transaction. The buyer has asked you for a payment schedule under several
alternatives.
Required:
1. What will be your periodic cash receipt, to earn a 11% return, if payments are received from the purchaser:
NOTE: to answer the above questions, use the PMT function in Excel, as follows:
PMT(rate,nper, pv,fv,type)
where: rate is the interest rate for the loan, nper is the total number of payments, pv is the present value (i.e., the total amount that a
series of future payments is worth now; also known as the principal), fv is the future value (or a cash balance you want to attain after
the last payment is made; if fv is omitted, it is assumed to be 0 (zero)), and type is…
A property owner has set up a contract in which he agrees to sell a warehouse 5 years from
now to the tenant who currently leases the space. The tenant has agreed to continue to pay
$20,000 in rent at the end of each year, including year five, at which time he will purchase the
building for an additional $1,500,000. Assuming the required rate of return on a similar
investment is 10% (annual), how much is this deal presently worth to the original owner of the
property?
$1,014,779.2
$1,007,197.20
$2,281,452.80
$2,293,663.00
Chapter 18 Solutions
Individual Income Taxes
Ch. 18 - Prob. 1DQCh. 18 - Prob. 2DQCh. 18 - Prob. 3DQCh. 18 - Prob. 4DQCh. 18 - Prob. 5DQCh. 18 - Prob. 6DQCh. 18 - Prob. 7DQCh. 18 - LO.2 In 2019, the taxpayer became ineligible to...Ch. 18 - LO.2 Osprey Corporation, an accrual basis...Ch. 18 - Prob. 10DQ
Ch. 18 - Prob. 11DQCh. 18 - Prob. 12DQCh. 18 - LO.2 Emerald Motors is an automobile dealer. The...Ch. 18 - Prob. 14DQCh. 18 - Prob. 15DQCh. 18 - Prob. 16DQCh. 18 - Prob. 17DQCh. 18 - LO.4, 7 In December 2019, Carl Corporation sold...Ch. 18 - LO.2, 5 What are the similarities between the crop...Ch. 18 - Prob. 20DQCh. 18 - Prob. 21DQCh. 18 - Prob. 22DQCh. 18 - LO.6 Largo Company is an engineering consulting...Ch. 18 - Prob. 24DQCh. 18 - Prob. 25DQCh. 18 - Prob. 26DQCh. 18 - Prob. 27CECh. 18 - LO.2 Gaffney Corporation is a wholesale...Ch. 18 - Prob. 29CECh. 18 - LO.2 In 2019, Chaya Corporation, an accrual basis,...Ch. 18 - Prob. 31CECh. 18 - Prob. 32CECh. 18 - Prob. 33CECh. 18 - Prob. 34CECh. 18 - Prob. 35CECh. 18 - Prob. 36CECh. 18 - Prob. 37CECh. 18 - Prob. 38CECh. 18 - Prob. 39PCh. 18 - Prob. 40PCh. 18 - Prob. 41PCh. 18 - In 2018, Juan entered into a contract to write a...Ch. 18 - Prob. 43PCh. 18 - Compute Marys income or deductions for 2019 using...Ch. 18 - What accounting method (cash or accrual) would you...Ch. 18 - Blue Company, an architectural firm, has a...Ch. 18 - How do the all events and economic performance...Ch. 18 - Ross Company is a C corporation providing property...Ch. 18 - Prob. 49PCh. 18 - Prob. 50PCh. 18 - Floyd, a cash basis taxpayer, has received an...Ch. 18 - Prob. 52PCh. 18 - Prob. 53PCh. 18 - On June 30, 2019, Kelly sold property for 240,000...Ch. 18 - Prob. 55PCh. 18 - Prob. 56PCh. 18 - Prob. 57PCh. 18 - Prob. 58PCh. 18 - Prob. 59PCh. 18 - Ostrich Company makes gasoline storage tanks....Ch. 18 - Prob. 61PCh. 18 - Grouse Company is a furniture retailer whose...Ch. 18 - Lavender Manufacturing Company began business in...Ch. 18 - Silver Creek Ranch LLC is a small, family-owned...Ch. 18 - In 2019, Gail changed from the lower of cost or...Ch. 18 - At the end of 2020, Magenta Manufacturing Company...Ch. 18 - Prob. 67PCh. 18 - Prob. 68PCh. 18 - Prob. 69PCh. 18 - Prob. 1RPCh. 18 - Prob. 2RPCh. 18 - Prob. 3RPCh. 18 - Paula has sales that qualify to be reported on the...
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