This is where an installment sale
could fend off these additional taxes by spreading the income over multiple years.
453A(a)(1) imposes an interest charge on nondealer installment obligations where the property's sales price exceeds $150,000 and the total amount of all installment sale
obligations that arose during the tax year and were outstanding at the end of the tax year exceed $.
A taxpayer does not need to elect installment sale
For IRS purposes, whether or not seller elects the Installment Sale
method, the parties must agree on the allocation of purchase price among the various types of assets, using fair market value (FMV] as the guide.
The child's obligation to the parent may be secured, which also distinguishes the installment sale
from the private annuity.
The investor must decide whether the installment sale
is better than waiting for a cash buyer, or substantially reducing the price for a quicker cash sale.
The self-cancelling installment note, or SCIN, is a variation of the installment sale
, a hybrid between an installment sale
and a private annuity (see Chapter 36).
See the article "Deferred Gain on the Installment Sale
of Intangible Asset, AB 115's Unraveling Begins" (Spidell's CA Tax Letter, October 2003).
Thus, under the new installment sale
rules for accrual basis taxpayers, X will recognize the entire amount of the gain or loss from the installment sale
in year 1.
The Installment Sales
Revision Act of 1980(56) eliminated the 30-percent rules for installment sales
occurring in taxable years ending after October 19, 1980.
Once established, the grantor then makes a gift of cash or other liquid assets to the trust, equal in value to 10 percent or more of the value of the property that will be sold to the trust in the subsequent installment sale
In certain circumstances the installment sale
method permits a sale of property without the seller being required to report the gain until the actual receipt of payment.