Norm is negotiating the sale of a tract of his land to Pat. Use the following classification scheme to classify each of the items contained in the proposed sales contract:
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Legend |
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DARN |
= |
Decreases amount realized by Norm |
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IARN |
= |
Increases amount realized by Norm |
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DABN |
= |
Decreases adjusted basis to Norm |
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IABN |
= |
Increases adjusted basis to Norm |
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DABP |
= |
Decreases adjusted basis to Pat |
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IABP |
= |
Increases adjusted basis to Pat |
a. Norm is to receive cash of $50,000.
b. Norm is to receive Pat’s note payable for $25,000, payable in three years.
c. Pat assumes Norm’s mortgage of $5,000 on the land.
d. Pat agrees to pay the realtor’s sales commission of $8,000.
e. Pat agrees to pay the property taxes on the land for the entire year. If each party paid his or her respective share, Norm’s share would be $1,000 and Pat’s share would be $3,000.
f. Pat pays legal fees of $500.
g. Norm pays legal fees of $750.