Installment Sales

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Introduction

An installment sale is a sale of property where you receive at least one payment after the tax year of the sale. If you realize a gain on an installment sale, you may be able to report part of your gain when you receive each payment. This method of reporting gain is called the installment method. You cannot use the installment method to report a loss. You can choose to report all of your gain in the year of sale.

This publication discusses the general rules that apply to using the installment method. It also discusses more complex rules that apply only when certain conditions exist or certain types of property are sold. There are two examples of reporting installment sale income on Form 6252 at the end of the publication.

If you sell your home or other nonbusiness property under an installment plan, you may need to read only the General Rules. If you sell business or rental property or have a like-kind exchange or other complex situation, see the appropriate discussion under Other Rules, later.

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Useful items

You may want to see:

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taxmap/pubs/p537-000.htm#TXMP7b63b6fb What Is an   Installment Sale?

Installment Sale

An installment sale is a sale of property where you receive at least one payment after the tax year of the sale.

taxmap/pubs/p537-000.htm#TXMP7adbec2e Sale of inventory.

The regular sale of inventory is not an installment sale even if you receive a payment after the year of sale. See Sale of a Business under Other Rules, later.

taxmap/pubs/p537-000.htm#TXMP53acc20a Dealer sales.

Sales of personal property by a person who regularly sells or otherwise disposes of the same type of personal property on the installment plan are not installment sales. This rule also applies to real property held for sale to customers in the ordinary course of a trade or business. However, the rule does not apply to an installment sale of property used or produced in farming.

taxmap/pubs/p537-000.htm#TXMP4b180c00 Special rule.

Dealers of time-shares and residential lots can treat certain sales as installment sales and report them under the installment method if they elect to pay a special interest charge. For more information, see section 453(l) of the Internal Revenue Code.

taxmap/pubs/p537-000.htm#TXMP366f502e Stock or securities.

You cannot use the installment method to report gain from the sale of stock or securities traded on an established securities market. You must report the entire gain on the sale in the year in which the trade date falls.

taxmap/pubs/p537-000.htm#TXMP3e2e8f10 Installment obligation.

The buyer's obligation to make future payments to you can be in the form of a deed of trust, note, land contract, mortgage, or other evidence of the buyer's debt to you.

Previous Page:  Publication 535 - Business Expenses - How To Get Tax Help Next Page:  Publication 537 - Installment Sales - General Rules Use     to find additional instances of index items.