What is Related-party installment sales?
In short
If a related buyer in an installment sale resells the property within 2 years, the original seller must recognize the remaining deferred gain, to the extent of the resale proceeds.
Key takeaways
- The 2-year limit doesn't apply to marketable securities, which have no time limit.
- Sales of depreciable property to a controlled entity can't use the installment method.
- Resales caused by death or involuntary conversion are excepted.
Where it's tested
TCP: Property Transactions: Advanced Planning — study notes, a five-minute revision sheet and practice questions.
Practise: 3 questions
Question 1 of 3 · 0 answered
A taxpayer sells equipment with an adjusted basis of $60,000 (original cost $100,000, accumulated depreciation $40,000) for $120,000, receiving payments over four years. What is recognized in the year of sale beyond any installment gain on the first payment?