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IRA acquired 47.5 percent of the common stock of Schnitzer-
PMS Corp. with a value of roughly $522,500 for $150,000. We hold
that the bargain element is $372,500 ($522,500 - $150,000) and
the gain on the sale is $2,577,500 ($3.1 million - $522,500).
The gross profit ratio is 83.15 percent ($2,577,500 divided by
$3.1 million).
IRA received the following payments of principal and
interest on the installment sale of the Schnitzer-PMS Corp.
stock:
Year Payment Principal Interest
1979 $150,000 $150,000 --
1980 533,425 211,468 $321,957
1981 534,696 309,308 225,388
1982 361,692 172,441 189,251
1983 361,692 186,655 175,037
1984 361,692 202,042 159,650
1985 361,692 218,696 142,996
1986 361,692 236,724 124,968
1987 361,692 256,217 105,475
1988 361,692 277,360 84,332
1989 840,423 822,841 17,582
Total 4,590,388 3,043,752 1,546,636
The gain on the sale is computed as follows:
Year Principal Profit Ratio Gain
1979 $150,000 .8315 $124,725
1980 211,468 .8315 175,836
1981 309,308 .8315 257,190
1982 172,441 .8315 143,385
1983 186,655 .8315 155,204
1984 202,042 .8315 167,998
1985 218,696 .8315 181,846
1986 236,724 .8315 196,836
1987 256,217 .8315 213,044
1988 277,360 .8315 230,625
Total 1,846,689
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