Important Reminders
Accrual basis taxpayers. For sales occurring after December 16, 1999, accrual basis taxpayers were required to report installment sales under the
accrual method of
accounting. The Installment Tax Correction Act of December 28, 2000, repealed that requirement.
If you entered into an installment sale after December 16, 1999, and filed an income tax return by April 16, 2001, reporting
the sale on an accrual
method, you have IRS approval to revoke your effective election out of the installment method. (See Electing Out of the Installment
Method).
To revoke the election, you must file an amended return for the year of the installment sale (and any other year affected
by the sale), reporting
the gain on the installment method. (See Figuring Installment Sale Income and Reporting Installment Sale Income). You generally
have three years from the due date of the original return to file an amended return. You cannot revoke your effective election
out of the installment
method if the taxable year in which any payment on the installment obligation was received has closed.
Photographs of missing children. The Internal Revenue Service is a proud partner with the National Center for Missing and Exploited Children. Photographs of
missing children
selected by the Center may appear in this publication on pages that would otherwise be blank. You can help bring these children
home by looking at the
photographs and calling 1–800–THE–LOST (1–800–843–5678) if you recognize a child.
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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