Mike's basis in the cotton after he redeemed it was $1,500, which is the redemption (repurchase) price paid for the cotton. His gain from the sale is $1,000 ($2,500 – $1,500). He reports the $2,500 sale on line 1a and the $1,500 basis on line 1b. After subtracting his basis from the sale, Mike will have a $1,000 gain for 2021 on Schedule F