Practice Quiz

Florida Real Estate Exam

Category - Florida

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When John purchased Joan’s property on an installment sale, he assumed an existing loan, which exceeded Joan’s basis in the property.  The amount of the assumed loan over Joan’s basis will be:

  1. Deducted from Joan’s basis
  2. Treated as part of the sales price
  3. Added to Joan’s basis
  4. Treated as part of the down payment whether cash was received or not
Explanation
Answer D - In an installment sale, the amount of an assumed loan which exceeds the seller’s cost basis is treated as part of the down payment and is taxable in the year of the sale.

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