W Sold a Residence for $40,000 Payable as Follows: Cash $\quad$

Multiple Choice

W sold a residence for $40,000 payable as follows: Cash down payments $\quad$$\quad$$\quad \$ 8,000$
Existing loan assumed by buyer $\quad 20,000$
Promissory note bearing interest at
10 percent, payable to $W$ in two years $\quad$ 12,000 No payments were made on the promissory note during the year of sale.Assuming W's basis is $30,000, how much gain is recognized by W in the year of sale? Ignore selling costs.

A) $2,000
B) $4,000
C) $7,000
D) $10,000