Installment+Sales

Installment Sales Section 453 is essentially a culmination of:

453 requires that a percentage of each payment be included in gross income in the year of receipt. [453(c)] The percentage is the ratio of the "Gross profit" to the "Total contract price". - Gross Profit: the gain on teh sale of the property that will be realized over the life of all the payments; - Total contract price = generally the 'selling price'.


 * Definition:** When at least one payment of the total purchase price is to be received after the close of the taxable year in which the disposition occurs.

-End-

-CITE- 26 USC Sec. 453                                            01/07/2011

-EXPCITE- TITLE 26 - INTERNAL REVENUE CODE Subtitle A - Income Taxes CHAPTER 1 - NORMAL TAXES AND SURTAXES Subchapter E - Accounting Periods and Methods of Accounting PART II - METHODS OF ACCOUNTING Subpart B - Taxable Year for Which Items of Gross Income Included

-HEAD- Sec. 453. Installment method

-STATUTE- (a) General rule Except as otherwise provided in this section, income from an   installment sale shall be taken into account for purposes of this title under the installment method. (b) Installment sale defined For purposes of this section - (1) In general The term "installment sale" means a disposition of property where at least 1 payment is to be received after the close of the taxable year in which the disposition occurs. (2) Exceptions The term "installment sale" does not include - (A) Dealer dispositions Any dealer disposition (as defined in subsection (l)). (B) Inventories of personal property A disposition of personal property of a kind which is       required to be included in the inventory of the taxpayer if on        hand at the close of the taxable year. (c) Installment method defined For purposes of this section, the term "installment method" means a method under which the income recognized for any taxable year from a disposition is that proportion of the payments received in   that year which the gross profit (realized or to be realized when    payment is completed) bears to the total contract price. (d) Election out (1) In general Subsection (a) shall not apply to any disposition if the taxpayer elects to have subsection (a) not apply to such disposition. (2) Time and manner for making election Except as otherwise provided by regulations, an election under paragraph (1) with respect to a disposition may be made only on     or before the due date prescribed by law (including extensions) for filing the taxpayer's return of the tax imposed by this chapter for the taxable year in which the disposition occurs. Such an election shall be made in the manner prescribed by     regulations. (3) Election revocable only with consent An election under paragraph (1) with respect to any disposition may be revoked only with the consent of the Secretary. (e) Second dispositions by related persons (1) In general If - (A) any person disposes of property to a related person (hereinafter in this subsection referred to as the "first       disposition"), and (B) before the person making the first disposition receives all payments with respect to such disposition, the related person disposes of the property (hereinafter in this subsection       referred to as the "second disposition"),

then, for purposes of this section, the amount realized with respect to such second disposition shall be treated as received at the time of the second disposition by the person making the first disposition. (2) 2-Year cutoff for property other than marketable securities (A) In general Except in the case of marketable securities, paragraph (1) shall apply only if the date of the second disposition is not more than 2 years after the date of the first disposition. (B) Substantial diminishing of risk of ownership The running of the 2-year period set forth in subparagraph (A) shall be suspended with respect to any property for any period during which the related person's risk of loss with respect to the property is substantially diminished by - (i) the holding of a put with respect to such property (or         similar property), (ii) the holding by another person of a right to acquire the property, or           (iii) a short sale or any other transaction. (3) Limitation on amount treated as received The amount treated for any taxable year as received by the person making the first disposition by reason of paragraph (1) shall not exceed the excess of - (A) the lesser of - (i) the total amount realized with respect to any second disposition of the property occurring before the close of the taxable year, or           (ii) the total contract price for the first disposition, over

(B) the sum of - (i) the aggregate amount of payments received with respect to the first disposition before the close of such year, plus (ii) the aggregate amount treated as received with respect to the first disposition for prior taxable years by reason of         this subsection. (4) Fair market value where disposition is not sale or exchange For purposes of this subsection, if the second disposition is     not a sale or exchange, an amount equal to the fair market value of the property disposed of shall be substituted for the amount realized. (5) Later payments treated as receipt of tax paid amounts If paragraph (1) applies for any taxable year, payments received in subsequent taxable years by the person making the first disposition shall not be treated as the receipt of payments with respect to the first disposition to the extent that the aggregate of such payments does not exceed the amount treated as     received by reason of paragraph (1). (6) Exception for certain dispositions For purposes of this subsection - (A) Reacquisitions of stock by issuing corporation not treated as first dispositions Any sale or exchange of stock to the issuing corporation shall not be treated as a first disposition. (B) Involuntary conversions not treated as second dispositions A compulsory or involuntary conversion (within the meaning of       section 1033) and any transfer thereafter shall not be treated as a second disposition if the first disposition occurred before the threat or imminence of the conversion. (C) Dispositions after death Any transfer after the earlier of - (i) the death of the person making the first disposition, or           (ii) the death of the person acquiring the property in the first disposition,

and any transfer thereafter shall not be treated as a second disposition. (7) Exception where tax avoidance not a principal purpose This subsection shall not apply to a second disposition (and     any transfer thereafter) if it is established to the satisfaction of the Secretary that neither the first disposition nor the second disposition had as one of its principal purposes the avoidance of Federal income tax. (8) Extension of statute of limitations The period for assessing a deficiency with respect to a first disposition (to the extent such deficiency is attributable to the     application of this subsection) shall not expire before the day which is 2 years after the date on which the person making the first disposition furnishes (in such manner as the Secretary may     by regulations prescribe) a notice that there was a second disposition of the property to which this subsection may have applied. Such deficiency may be assessed notwithstanding the provisions of any law or rule of law which would otherwise prevent such assessment. (f) Definitions and special rules For purposes of this section - (1) Related person Except for purposes of subsections (g) and (h), the term "related person" means - (A) a person whose stock would be attributed under section 318(a) (other than paragraph (4) thereof) to the person first disposing of the property, or         (B) a person who bears a relationship described in section 267(b) to the person first disposing of the property. (2) Marketable securities The term "marketable securities" means any security for which, as of the date of the disposition, there was a market on an     established securities market or otherwise. (3) Payment Except as provided in paragraph (4), the term "payment" does not include the receipt of evidences of indebtedness of the person acquiring the property (whether or not payment of such     indebtedness is guaranteed by another person). (4) Purchaser evidences of indebtedness payable on demand or       readily tradable Receipt of a bond or other evidence of indebtedness which - (A) is payable on demand, or         (B) is readily tradable,

shall be treated as receipt of payment. (5) Readily tradable defined For purposes of paragraph (4), the term "readily tradable" means a bond or other evidence of indebtedness which is issued - (A) with interest coupons attached or in registered form (other than one in registered form which the taxpayer       establishes will not be readily tradable in an established        securities market), or          (B) in any other form designed to render such bond or other evidence of indebtedness readily tradable in an established securities market. (6) Like-kind exchanges In the case of any exchange described in section 1031(b) - (A) the total contract price shall be reduced to take into account the amount of any property permitted to be received in       such exchange without recognition of gain, (B) the gross profit from such exchange shall be reduced to       take into account any amount not recognized by reason of        section 1031(b), and (C) the term "payment", when used in any provision of this section other than subsection (b)(1), shall not include any property permitted to be received in such exchange without recognition of gain.

Similar rules shall apply in the case of an exchange which is     described in section 356(a) and is not treated as a dividend. (7) Depreciable property The term "depreciable property" means property of a character which (in the hands of the transferee) is subject to the allowance for depreciation provided in section 167. (8) Payments to be received defined The term "payments to be received" includes - (A) the aggregate amount of all payments which are not contingent as to amount, and (B) the fair market value of any payments which are contingent as to amount. (g) Sale of depreciable property to controlled entity (1) In general In the case of an installment sale of depreciable property between related persons - (A) subsection (a) shall not apply, (B) for purposes of this title - (i) except as provided in clause (ii), all payments to be         received shall be treated as received in the year of the disposition, and (ii) in the case of any payments which are contingent as to         the amount but with respect to which the fair market value may not be reasonably ascertained, the basis shall be         recovered ratably, and

(C) the purchaser may not increase the basis of any property acquired in such sale by any amount before the time such amount is includible in the gross income of the seller. (2) Exception where tax avoidance not a principal purpose Paragraph (1) shall not apply if it is established to the satisfaction of the Secretary that the disposition did not have as one of its principal purposes the avoidance of Federal income tax. (3) Related persons For purposes of this subsection, the term "related persons" has the meaning given to such term by section 1239(b), except that such term shall include 2 or more partnerships having a     relationship to each other described in section 707(b)(1)(B). (h) Use of installment method by shareholders in certain liquidations (1) Receipt of obligations not treated as receipt of payment (A) In general If, in a liquidation to which section 331 applies, the shareholder receives (in exchange for the shareholder's stock) an installment obligation acquired in respect of a sale or       exchange by the corporation during the 12-month period beginning on the date a plan of complete liquidation is adopted and the liquidation is completed during such 12-month period, then, for purposes of this section, the receipt of payments under such obligation (but not the receipt of such obligation) by the shareholder shall be treated as the receipt of payment for the stock. (B) Obligations attributable to sale of inventory must result from bulk sale Subparagraph (A) shall not apply to an installment obligation acquired in respect of a sale or exchange of - (i) stock in trade of the corporation, (ii) other property of a kind which would properly be         included in the inventory of the corporation if on hand at          the close of the taxable year, and (iii) property held by the corporation primarily for sale to customers in the ordinary course of its trade or business,

unless such sale or exchange is to 1 person in 1 transaction and involves substantially all of such property attributable to       a trade or business of the corporation. (C) Special rule where obligor and shareholder are related persons If the obligor of any installment obligation and the shareholder are married to each other or are related persons (within the meaning of section 1239(b)), to the extent such installment obligation is attributable to the disposition by       the corporation of depreciable property - (i) subparagraph (A) shall not apply to such obligation, and (ii) for purposes of this title, all payments to be         received by the shareholder shall be deemed received in the year the shareholder receives the obligation. (D) Coordination with subsection (e)(1)(A) For purposes of subsection (e)(1)(A), disposition of property by the corporation shall be treated also as disposition of such property by the shareholder. (E) Sales by liquidating subsidiaries For purposes of subparagraph (A), in the case of a       controlling corporate shareholder (within the meaning of        section 368(c)) of a selling corporation, an obligation acquired in respect of a sale or exchange by the selling corporation shall be treated as so acquired by such controlling corporate shareholder. The preceding sentence shall be applied successively to each controlling corporate shareholder above such controlling corporate shareholder. (2) Distributions received in more than 1 taxable year of       shareholder If - (A) paragraph (1) applies with respect to any installment obligation received by a shareholder from a corporation, and (B) by reason of the liquidation such shareholder receives property in more than 1 taxable year,

then, on completion of the liquidation, basis previously allocated to property so received shall be reallocated for all such taxable years so that the shareholder's basis in the stock of the corporation is properly allocated among all property received by such shareholder in such liquidation. (i) Recognition of recapture income in year of disposition (1) In general In the case of any installment sale of property to which subsection (a) applies - (A) notwithstanding subsection (a), any recapture income shall be recognized in the year of the disposition, and (B) any gain in excess of the recapture income shall be taken into account under the installment method. (2) Recapture income For purposes of paragraph (1), the term "recapture income" means, with respect to any installment sale, the aggregate amount which would be treated as ordinary income under (or so much of     section 751 as relates to section 1245 or 1250) for the taxable year of the disposition if all payments to be received were received in the taxable year of disposition. (j) Regulations (1) In general The Secretary shall prescribe such regulations as may be     necessary or appropriate to carry out the provisions of this section. (2) Selling price not readily ascertainable The regulations prescribed under paragraph (1) shall include regulations providing for ratable basis recovery in transactions where the gross profit or the total contract price (or both) cannot be readily ascertained. (k) Current inclusion in case of revolving credit plans, etc.     In the case of - (1) any disposition of personal property under a revolving credit plan, or       (2) any installment obligation arising out of a sale of - (A) stock or securities which are traded on an established securities market, or         (B) to the extent provided in regulations, property (other        than stock or securities) of a kind regularly traded on an        established market,

subsection (a) shall not apply, and, for purposes of this title, all payments to be received shall be treated as received in the year of disposition. The Secretary may provide for the application of this subsection in whole or in part for transactions in which the rules of this subsection otherwise would be avoided through the use of related parties, pass-thru entities, or intermediaries. (l) Dealer dispositions For purposes of subsection (b)(2)(A) - (1) In general The term "dealer disposition" means any of the following dispositions: (A) Personal property Any disposition of personal property by a person who regularly sells or otherwise disposes of personal property of       the same type on the installment plan. (B) Real property Any disposition of real property which is held by the taxpayer for sale to customers in the ordinary course of the taxpayer's trade or business. (2) Exceptions The term "dealer disposition" does not include - (A) Farm property The disposition on the installment plan of any property used or produced in the trade or business of farming (within the       meaning of section 2032A(e)(4) or (5)). (B) Timeshares and residential lots (i) In general Any dispositions described in clause (ii) on the installment plan if the taxpayer elects to have paragraph (3) apply to any installment obligations which arise from such dispositions. An election under this paragraph shall not apply with respect to an installment obligation which is         guaranteed by any person other than an individual. (ii) Dispositions to which subparagraph applies A disposition is described in this clause if it is a         disposition in the ordinary course of the taxpayer's trade or          business to an individual of - (I) a timeshare right to use or a timeshare ownership interest in residential real property for not more than 6 weeks per year, or a right to use specified campgrounds for recreational purposes, or             (II) any residential lot, but only if the taxpayer (or            any related person) is not to make any improvements with respect to such lot.

For purposes of subclause (I), a timeshare right to use (or         timeshare ownership interest in) property held by the spouse, children, grandchildren, or parents of an individual shall be         treated as held by such individual. (C) Carrying charges or interest Any carrying charges or interest with respect to a       disposition described in subparagraph (A) or (B) which are added on the books of account of the seller to the established cash selling price of the property shall be included in the total contract price of the property and, if such charges or       interest are not so included, any payments received shall be        treated as applying first against such carrying charges or        interest. (3) Payment of interest on timeshares and residential lots (A) In general In the case of any installment obligation to which paragraph (2)(B) applies, the tax imposed by this chapter for any taxable year for which payment is received on such obligation shall be       increased by the amount of interest determined in the manner provided under subparagraph (B). (B) Computation of interest (i) In general The amount of interest referred to in subparagraph (A) for any taxable year shall be determined - (I) on the amount of the tax for such taxable year which is attributable to the payments received during such taxable year on installment obligations to which this subsection applies, (II) for the period beginning on the date of sale, and ending on the date such payment is received, and (III) by using the applicable Federal rate under section 1274 (without regard to subsection (d)(2) thereof) in           effect at the time of the sale compounded semiannually. (ii) Interest not taken into account For purposes of clause (i), the portion of any tax attributable to the receipt of any payment shall be         determined without regard to any interest imposed under subparagraph (A). (iii) Taxable year of sale No interest shall be determined for any payment received in         the taxable year of the disposition from which the installment obligation arises. (C) Treatment as interest Any amount payable under this paragraph shall be taken into account in computing the amount of any deduction allowable to       the taxpayer for interest paid or accrued during such taxable year.

-SOURCE- (Added Pub. L. 96-471, Sec. 2(a), Oct. 19, 1980, 94 Stat. 2247;   amended Pub. L. 97-34, title II, Sec. 202(c), Aug. 13, 1981, 95    Stat. 221; Pub. L. 97-448, title III, Sec. 303, Jan. 12, 1983, 96    Stat. 2398; Pub. L. 98-369, div. A, title I, Sec. 112(a), title IV,    Sec. 421(b)(6)(B), (C), July 18, 1984, 98 Stat. 635, 794; Pub. L.    99-514, title VI, Secs. 631(e)(8), 642(a)(1)(D), (3), (b), title    VIII, Sec. 812(a), title XVIII, Sec. 1809(c), Oct. 22, 1986, 100    Stat. 2274, 2284, 2371, 2821; Pub. L. 100-203, title X, Sec.    10202(b), Dec. 22, 1987, 101 Stat. 1330-388; Pub. L. 100-647, title    I, Secs. 1006(e)(7), (i)(1), (2), 1008(g)(1), 1018(u)(25), (26),    title II, Sec. 2004(d)(1), (5), Nov. 10, 1988, 102 Stat. 3401,    3410, 3442, 3591, 3599; Pub. L. 106-170, title V, Sec. 536(a), Dec.    17, 1999, 113 Stat. 1936; Pub. L. 106-573, Sec. 2(a), Dec. 28,    2000, 114 Stat. 3061; Pub. L. 108-357, title VIII, Sec. 897(a), Oct. 22, 2004, 118 Stat. 1649.)

-MISC1- PRIOR PROVISIONS A prior section 453, acts Aug. 16, 1954, ch. 736, 68A Stat. 154;   Sept. 2, 1958, Pub. L. 85-866, title I, Sec. 27(a), 72 Stat. 1624;   Oct. 16, 1962, Pub. L. 87-834, Sec. 13(f)(5), 76 Stat. 1035; Feb. 26, 1964, Pub. L. 88-272, title II, Secs. 222(a), 231(b)(5), 78 Stat. 75, 105; Aug. 22, 1964, Pub. L. 88-484, Sec. 1(b)(2), 78 Stat. 597; Aug. 31, 1964, Pub. L. 88-539, Sec. 3(a), (b), 78 Stat. 746; Sept. 12, 1966, Pub. L. 89-570, Sec. 1(b)(5), 80 Stat. 762;   Nov. 13, 1966, Pub. L. 89-809, title II, Sec. 202(c), 80 Stat. 1576; Dec. 30, 1969, Pub. L. 91-172, title II, Sec. 211(b)(5), title III, Sec. 301(b)(7), title IV, Sec. 412(a), title IX, Sec. 916(a), 83 Stat. 570, 585, 608, 723; Oct. 4, 1976, Pub. L. 94-455, title II, Sec. 205(c)(1)(E), title XIX, Secs. 1901(a)(66), 1906(b)(13)(A), 1951(b)(7)(A), 90 Stat. 1535, 1775, 1834, 1838;   Nov. 6, 1978, Pub. L. 95-600, title VII, Sec. 703(j)(3), 92 Stat. 2941; Apr. 1, 1980, Pub. L. 96-222, title I, Sec. 104(a)(4)(H)(iv), 94 Stat. 217; Apr. 2, 1980, Pub. L. 96-223, title IV, Sec. 403(b)(2)(B), 94 Stat. 305; Oct. 19, 1980, Pub. L. 96-471, Sec. 2(c)(4), 94 Stat. 2254, related to installment method in general, installment method for dealers in personal property, and gain or   loss dispositions of installment obligations, prior to repeal by    Pub. L. 96-471, Sec. 2(a), Oct. 19, 1980, 94 Stat. 2247. See sections 453A and 453B of this title.

AMENDMENTS 2004 - Subsec. (f)(4)(B). Pub. L. 108-357 struck out "is issued   by a corporation or a government or political subdivision thereof    and" before "is readily tradable". 2000 - Subsecs. (a), (d)(1), (i)(1), (k). Pub. L. 106-573 repealed Pub. L. 106-170, Sec. 536(a). See 1999 Amendment notes below. 1999 - Subsec. (a). Pub. L. 106-170, Sec. 536(a)(1), which substituted "Use of installment method" for "General rule" in   subsec. heading, designated existing provisions as par. (1) and inserted heading, and added heading and text of par. (2), text of   which read as follows: "(2) Accrual method taxpayer. - The    installment method shall not apply to income from an installment    sale if such income would be reported under an accrual method of    accounting without regard to this section. The preceding sentence    shall not apply to a disposition described in subparagraph (A) or    (B) of subsection (l)(2).", was repealed by Pub. L. 106-573, Sec. 2(a). See Effective Date and Construction of 2000 Amendment note below. Subsecs. (d)(1), (i)(1), (k). Pub. L. 106-170, Sec. 536(a)(2), which substituted "(a)(1)" for "(a)" wherever appearing, was repealed by Pub. L. 106-573. See Effective Date and Construction of   2000 Amendment note below. 1988 - Subsec. (f)(1). Pub. L. 100-647, Sec. 1018(u)(25), substituted "subsections (g)" for "subsection (g)". Subsec. (f)(8). Pub. L. 100-647, Sec. 1018(u)(26), substituted "payments to be" for "payment to be". Subsec. (g)(1). Pub. L. 100-647, Sec. 1006(i)(2)(B), struck out "(within the meaning of section 1239(b))" after "between related   persons". Pub. L. 100-647, Sec. 1006(i)(1), added subpars. (A) to (C) and struck out former subpars. (A) and (B) which read as follows: "(A) subsection (a) shall not apply, and     "(B) for purposes of this title - "(i) except as provided in clause (ii), all payments to be     received shall be treated as received in the year of the      disposition, and        "(ii) in the case of any payments which are contingent as to      amount but with respect to which the fair market value may not be      reasonably ascertained - "(I) the basis shall be recovered ratably, and         "(II) the purchaser may not increase the basis of any property acquired in such sale by any amount before such time as the seller includes such amount in income."     Subsec. (g)(3). Pub. L. 100-647, Sec. 1006(i)(2)(A), added par.    (3).      Subsec. (h)(1)(B). Pub. L. 100-647, Sec. 1006(e)(7)(A),    substituted "to 1 person in 1 transaction" for "to one person" in    concluding provisions.      Subsec. (h)(1)(E). Pub. L. 100-647, Sec. 1006(e)(7)(B),    substituted "section 368(c)" for "section 368(c)(1)".      Subsec. (j). Pub. L. 100-647, Sec. 1008(g)(1), redesignated    subsec. (j), relating to current inclusion in case of revolving    credit plans, etc., as (k).      Subsec. (k). Pub. L. 100-647, Sec. 2004(d)(5), struck out "and section 453A" after "subsection (a)" in second sentence.     Pub. L. 100-647, Sec. 1008(g)(1), redesignated subsec. (j),    relating to current inclusion in case of revolving credit plans,    etc., as (k).      Subsec. (l)(1)(A). Pub. L. 100-647, Sec. 2004(d)(1), inserted "of the same type" after "disposes of personal property".     1987 - Subsec. (b)(2)(A). Pub. L. 100-203, Sec. 10202(b)(1),    substituted "Dealer dispositions" for "Dealer disposition of    personal property" in heading and amended text generally. Prior to    amendment, text read as follows: "A disposition of personal property on the installment plan by a person who regularly sells or   otherwise disposes of personal property on the installment plan."      Subsec. (l). Pub. L. 100-203, Sec. 10202(b)(2), added subsec.    (l).      1986 - Subsec. (f)(1). Pub. L. 99-514, Sec. 642(a)(3), amended    par. (1) generally. Prior to amendment, par. (1) read as follows:    "Except for purposes of subsections (g) and (h), the term 'related person' means a person whose stock would be attributed under section 318(a) (other than paragraph (4) thereof) to the person first disposing of the property."     Subsec. (f)(8). Pub. L. 99-514, Sec. 642(b)(1), added par. (8).      Subsec. (g). Pub. L. 99-514, Sec. 642(a)(1)(D), substituted    "controlled entity" for "80-percent owned entity" in heading.      Subsec. (g)(1). Pub. L. 99-514, Sec. 642(b)(2), amended par. (1)    generally. Prior to amendment, par. (1) read as follows: "In the case of an installment sale of depreciable property between related persons within the meaning of section 1239(b), subsection (a) shall not apply, and, for purposes of this title, all payments to be   received shall be deemed received in the year of the disposition."      Subsec. (h). Pub. L. 99-514, Sec. 631(e)(8)(C), substituted    "certain liquidations" for "section 337 liquidations" in heading.      Subsec. (h)(1)(A). Pub. L. 99-514, Sec. 631(e)(8)(A), amended    subpar. (A) generally. Prior to amendment, subpar. (A) read as    follows: "If, in connection with a liquidation to which section 337 applies, in a transaction to which section 331 applies the shareholder receives (in exchange for the shareholder's stock) an   installment obligation acquired in respect of a sale or exchange by    the corporation during the 12-month period set forth in section 337(a), then, for purposes of this section, the receipt of payments under such obligation (but not the receipt of such obligation) by   the shareholder shall be treated as the receipt of payment for the stock."     Subsec. (h)(1)(B). Pub. L. 99-514, Sec. 631(e)(8)(A), amended    subpar. (B) generally. Prior to amendment, subpar. (B) read as    follows: "Subparagraph (A) shall not apply to an installment obligation described in section 337(b)(1)(B) unless such obligation is also described in section 337(b)(2)(B)."     Subsec. (h)(1)(E). Pub. L. 99-514, Sec. 631(e)(8)(B), substituted    "subsidiaries" for "subsidiary" in heading and amended text    generally. Prior to amendment, subpar. (E) read as follows: "For purposes of subparagraph (A), in any case to which section 337(c)(3) applies, an obligation acquired in respect of a sale or   exchange by the selling corporation shall be treated as so acquired by the corporation distributing the obligation to the shareholder."     Subsec. (i)(2). Pub. L. 99-514, Sec. 1809(c), substituted "(or so    much of section 751 as relates to section 1245 or 1250)" for    "section 1245 or 1250".      Subsec. (j). Pub. L. 99-514, Sec. 812(a), added subsec. (j)    relating to current inclusion in case of revolving credit plans,    etc.      1984 - Subsec. (g). Pub. L. 98-369, Sec. 421(b)(6)(C), struck out    "spouse or" after "property to" in heading.      Subsec. (h)(1)(C). Pub. L. 98-369, Sec. 421(b)(6)(B), inserted    "married to each other or are".      Subsec. (i). Pub. L. 98-369, Sec. 112(a), amended subsec. (i)    generally, substituting provisions relating to recognition of    recapture income in year of disposition for provisions relating to    application of subsec. (a) in the case of an installment sale of    section 179 property.      1983 - Subsec. (f)(6)(C). Pub. L. 97-448 inserted ", when used in   any provision of this section other than subsection (b)(1)," after "the term 'payment' ". 1981 - Subsecs. (i), (j). Pub. L. 97-34 added subsec. (i) and redesignated former subsec. (i) as (j).

EFFECTIVE DATE OF 2004 AMENDMENT Pub. L. 108-357, title VIII, Sec. 897(b), Oct. 22, 2004, 118 Stat. 1649, provided that: "The amendment made by this section   [amending this section] shall apply to sales occurring on or after    the date of the enactment of this Act [Oct. 22, 2004]."

EFFECTIVE DATE AND CONSTRUCTION OF 2000 AMENDMENT Pub. L. 106-573, Sec. 2, Dec. 28, 2000, 114 Stat. 3061, provided that: "(a) In General. - Subsection (a) of section 536 of the Ticket to   Work and Work Incentives Improvement Act of 1999 (relating to    modification of installment method and repeal of installment method    for accrual method taxpayers) [Pub. L. 106-170, amending this    section] is repealed effective with respect to sales and other    dispositions occurring on or after the date of the enactment of    such Act [Dec. 17, 1999].      "(b) Applicability. - The Internal Revenue Code of 1986 shall be   applied and administered as if that subsection (and the amendments    made by that subsection) had not been enacted."

EFFECTIVE DATE OF 1999 AMENDMENT Pub. L. 106-170, title V, Sec. 536(c), Dec. 17, 1999, 113 Stat. 1936, provided that: "The amendments made by this section [amending   this section and section 453A of this title] shall apply to sales    or other dispositions occurring on or after the date of the    enactment of this Act [Dec. 17, 1999]."

EFFECTIVE DATE OF 1988 AMENDMENT Amendment by sections 1006(e)(7), (i)(1), (2), 1008(g)(1), and 1018(u)(25), (26) of Pub. L. 100-647 effective, except as otherwise provided, as if included in the provision of the Tax Reform Act of   1986, Pub. L. 99-514, to which such amendment relates, see section 1019(a) of Pub. L. 100-647, set out as a note under section 1 of   this title. Amendment by section 2004(d)(1), (5) of Pub. L. 100-647 effective, except as otherwise provided, as if included in the provisions of the Revenue Act of 1987, Pub. L. 100-203, title X, to   which such amendment relates, see section 2004(u) of Pub. L. 100- 647, set out as a note under section 56 of this title.

EFFECTIVE DATE OF 1987 AMENDMENT Section 10202(e) of Pub. L. 100-203, as amended by Pub. L. 100- 647, title II, Sec. 2004(d)(3), (4), (6), Nov. 10, 1988, 102 Stat. 3599, 3600, provided that: "(1) In general. - Except as provided in this subsection, the   amendments made by this section [amending this section and sections    56, 381, 453A, and 691 of this title and repealing section 453C of    this title] shall apply to dispositions in taxable years beginning    after December 31, 1987.      "(2) Special rules for dealers. -        "(A) In general. - In the case of dealer dispositions (within      the meaning of section 453(l)(1) of the Internal Revenue Code of      1986 as added by this section), the amendments made by      subsections (a) and (b) [amending this section and repealing      section 453C of this title] shall apply to installment      obligations arising from dispositions after December 31, 1987.        "(B) Special rules for obligations arising from dealer dispositions after february 28, 1986, and before january 1, 1988. -          "(i) In general. - In the case of an applicable installment        obligation arising from a disposition described in subclause        (I) or (II) of section 453C(e)(1)(A)(i) of the Internal Revenue        Code of 1986 (as in effect before the amendments made by this        section) before January 1, 1988, the amendments made by        subsections (a) and (b) shall apply to taxable years beginning        after December 31, 1987.          "(ii) Change in method of accounting. - In the case of any taxpayer who is required by clause (i) to change its method of       accounting for any taxable year with respect to obligations described in clause (i) - "(I) such change shall be treated as initiated by the         taxpayer,            "(II) such change shall be treated as made with the consent of the Secretary of the Treasury or his delegate, and "(III) the net amount of adjustments required by section         481 of the Internal Revenue Code of 1986 shall be taken into          account over a period not longer than 4 taxable years.        "(C) Certain rules made applicable. - For purposes of this paragraph, rules similar to the rules of paragraphs (4) and (5) of section 812(c) of the Tax Reform Act of 1986 [Pub. L. 99-514, set out as an Effective Date of 1986 Amendment note below] (as     added by the Technical and Miscellaneous Revenue Act of 1988      [Pub. L. 100-647]) shall apply. "(3) Special rule for nondealers. -        "(A) Election. - A taxpayer may elect, at such time and in such manner as the Secretary of the Treasury or his delegate may prescribe, to have the amendments made by subsections (a) and (c) [amending sections 381, 453A, and 691 of this title and repealing section 453C of this title] apply to taxable years ending after December 31, 1986, with respect to dispositions and pledges occurring after August 16, 1986. "(B) Pledging rules. - Except as provided in subparagraph (A) -         "(i) In general. - Section 453A(d) of the Internal Revenue Code of 1986 shall apply to any installment obligation which is       pledged to secure any secured indebtedness (within the meaning        of section 453A(d)(4) of such Code) after December 17, 1987, in        taxable years ending after such date. "(ii) Coordination with section 453c. - For purposes of       section 453C of such Code (as in effect before its repeal), the        face amount of any obligation to which section 453A(d) of such        Code applies shall be reduced by the amount treated as payments        on such obligation under section 453A(d) of such Code and the        amount of any indebtedness secured by it shall not be taken        into account.        "(C) Certain dispositions deemed made on 1st day of taxable year. - If the taxpayer makes an election under subparagraph (A), in the case of the taxpayer's 1st taxable year ending after December 31, 1986 - "(i) dispositions after August 16, 1986, and before the 1st       day of such taxable year shall be treated as made on such 1st        day, and          "(ii) subsections (b)(2)(B) and (c)(4) of section 453A of        such Code shall be applied separately with respect to such dispositions by substituting for '$5,000,000' the amount which bears the same ratio to $5,000,000 as the number of days after August 16, 1986, and before such 1st day bears to 365. "(4) Minimum tax. - The amendment made by subsection (d)   [amending section 56 of this title] shall apply to dispositions in    taxable years beginning after December 31, 1986.      "(5) Coordination with tax reform act of 1986. - The amendments made by this section shall not apply to any installment obligation or to any taxpayer during any period to the extent the amendments made by section 811 of the Tax Reform Act of 1986 [section 811 of   Pub. L. 99-514, amending former section 453C of this title and enacting provisions set out as a note under former section 453C of   this title] do not apply to such obligation or during such period."

EFFECTIVE DATE OF 1986 AMENDMENT Amendment by section 631(e)(8) of Pub. L. 99-514 applicable to   any distribution in complete liquidation, and any sale or exchange, made by a corporation after July 31, 1986, unless such corporation is completely liquidated before Jan. 1, 1987, any transaction described in section 338 of this title for which the acquisition date occurs after Dec. 31, 1986, and any distribution, not in   complete liquidation, made after Dec. 31, 1986, with exceptions and special and transitional rules, see section 633 of Pub. L. 99-514, set out as an Effective Date note under section 336 of this title. Amendment by section 642(a)(1)(D), (3), (b) of Pub. L. 99-514 applicable to sales after Oct. 22, 1986, in taxable years ending after such date, but not applicable to sales made after Aug. 14, 1986, which are made pursuant to a binding contract in effect on   Aug. 14, 1986, and at all times thereafter, see section 642(c) of    Pub. L. 99-514, set out as a note under section 1239 of this title. Section 812(c) of Pub. L. 99-514, as amended by Pub. L. 100-647, title I, Sec. 1008(g)(3)-(6), Nov. 10, 1988, 102 Stat. 3443,   provided that: "(1) In general. - Except as provided in paragraphs (2) and (3),   the amendment made by subsection (a) [amending this section] shall    apply to taxable years beginning after December 31, 1986.      "(2) Sales of stock, etc. - Section 453(k)(2) of the Internal Revenue Code of 1986, as added by subsection (a), shall apply to   sales after December 31, 1986, in taxable years ending after such date. "(3) Change in method of accounting. - In the case of any   taxpayer who made sales under a revolving credit plan and was on    the installment method under section 453 or 453A of the Internal    Revenue Code of 1986 for such taxpayer's last taxable year    beginning before January 1, 1987, the amendments made by this    section [amending this section and section 453A of this title]    shall be treated as a change in method of accounting for its 1st    taxable year beginning after December 31, 1986, and -         "(A) such change shall be treated as initiated by the taxpayer, "(B) such change shall be treated as having been made with the     consent of the Secretary,        "(C) the period for taking into account adjustments under section 481 of such Code by reason of such change shall be equal to 4 years, and "(D) except as provided in paragraph (4), the amount taken into     account in each of such 4 years shall be the applicable      percentage (determined in accordance with the following table) of      the net adjustment:                                                        The applicable     "In the case of the:                               percentage is: 1st taxable year                                        15 2nd taxable year                                        25 3rd taxable year                                        30 4th taxable year                                         30.

If the taxpayer's last taxable year beginning before January 1, 1987, was the taxpayer's 1st taxable year in which sales were made under a revolving credit plan, all adjustments under section 481 of   such Code shall be taken into account in the taxpayer's 1st taxable year beginning after December 31, 1986. "(4) Acceleration of adjustments where contraction in amount of   installment obligations. -         "(A) In general. - If the percentage determined under subparagraph (B) for any taxable year in the adjustment period exceeds the percentage which would otherwise apply under paragraph (3)(D) for such taxable year (determined after the     application of this paragraph for prior taxable years in the      adjustment period) - "(i) the percentage determined under subparagraph (B) shall       be substituted for the applicable percentage which would        otherwise apply under paragraph (3)(D), and          "(ii) any increase in the applicable percentage by reason of        clause (i) shall be applied to reduce the applicable percentage determined under paragraph (3)(D) for subsequent taxable years in the adjustment period (beginning with the 1st of such       subsequent taxable years). "(B) Determination of percentage. - For purposes of     subparagraph (A), the percentage determined under this      subparagraph for any taxable year in the adjustment period is the      excess (if any) of -           "(i) the percentage determined by dividing the aggregate contraction in revolving installment obligations by the aggregate face amount of such obligations outstanding as of the close of the taxpayer's last taxable year beginning before January 1, 1987, over "(ii) the sum of the applicable percentages under paragraph       (3)(D) (as modified by this paragraph) for prior taxable years        in the adjustment period.        "(C) Aggregate contraction in revolving installment obligations. - For purposes of subparagraph (B), the aggregate contraction in revolving installment obligations is the amount by     which - "(i) the aggregate face amount of the revolving installment       obligations outstanding as of the close of the taxpayer's last        taxable year beginning before January 1, 1987, exceeds          "(ii) the aggregate face amount of the revolving installment obligations outstanding as of the close of the taxable year involved. "(D) Revolving installment obligations. - For purposes of this     paragraph, the term 'revolving installment obligations' means      installment obligations arising under a revolving credit plan.        "(E) Treatment of certain obligations disposed of on or before october 26, 1987. - For purposes of subparagraphs (B)(i) and (C)(i), in determining the aggregate face amount of revolving installment obligations outstanding as of the close of the taxpayer's last taxable year beginning before January 1, 1987, there shall not be taken into account any obligation - "(i) which was disposed of to an unrelated person on or       before October 26, 1987, or          "(ii) was disposed of to an unrelated person on or after such date pursuant to a binding written contract in effect on       October 26, 1987, and at all times thereafter before such disposition. For purposes of the preceding sentence, the term 'unrelated person' means any person who is not a related person (as defined     in section 453(g) of the Internal Revenue Code of 1986). "(5) Limitation on losses from sales of obligations under   revolving credit plans. - If 1 or more obligations arising under a    revolving credit plan and taken into account under paragraph (3)    are disposed of during the adjustment period, then, notwithstanding    any other provision of law -         "(A) no losses from such dispositions shall be recognized, and "(B) the aggregate amount of the adjustment for taxable years     in the adjustment period (in reverse order of time) shall be      reduced by the amount of such losses.      "(6) Adjustment period. - For purposes of paragraphs (4) and (5), the adjustment period is the 4-year period under paragraph (3)."     Amendment by section 1809(c) of Pub. L. 99-514 effective, except    as otherwise provided, as if included in the provisions of the Tax    Reform Act of 1984, Pub. L. 98-369, div. A, to which such amendment    relates, see section 1881 of Pub. L. 99-514, set out as a note    under section 48 of this title.

EFFECTIVE DATE OF 1984 AMENDMENT Section 112(b) of Pub. L. 98-369 provided that: "(1) In general. - Except as otherwise provided in this   subsection, the amendments made by this section [amending this    section] shall apply with respect to dispositions made after June    6, 1984.      "(2) Exception. - The amendments made by this section shall not apply with respect to any disposition conducted pursuant to a   contract which was binding on March 22, 1984, and at all times thereafter. "(3) Special rule for certain dispositions before october 1,   1984. - The amendments made by this section shall not apply to any    disposition before October 1, 1984, of all or substantially all of    the personal property of a cable television business pursuant to a    written offer delivered by the seller on June 20, 1984, but only if    the last payment under the installment contract is due no later    than October 1, 1989." Amendment by section 421(b)(6)(B), (C) of Pub. L. 98-369 applicable to transfers after July 18, 1984, in taxable years ending after such date, subject to election to have amendment apply to transfers after 1983 or to transfers pursuant to existing decrees, see section 421(d) of Pub. L. 98-369, set out as an   Effective Date note under section 1041 of this title.

EFFECTIVE DATE OF 1983 AMENDMENT Section 311(a) of Pub. L. 97-448 provided that: "The amendments   made by sections 301, 302, and 303 [amending this section and    sections 453B and 1239 of this title] shall apply to dispositions    made after October 19, 1980, in taxable years ending after such    date."

EFFECTIVE DATE OF 1981 AMENDMENT Amendment by Pub. L. 97-34 applicable to property placed in   service after Dec. 31, 1980, in taxable years ending after that date, see section 209(a) of Pub. L. 97-34, set out as an Effective Date note under section 168 of this title.

EFFECTIVE DATE; APPLICATION OF FORMER SECTION 453(B) TO CERTAIN DISPOSITIONS Section 6(a) of Pub. L. 96-471, as amended by Pub. L. 99-514, Sec. 2, Oct. 22, 1986, 100 Stat. 2095, provided: "(1) In general. - Except as otherwise provided in this   subsection, the amendments made by sections 2 [enacting this    section and sections 453A and 453B of this title and amending    sections 311, 336, 337, 381, former section 453, and sections 453B,    481, 644, 691, and 1255 of this title] and 5 [amending section 1239    of this title] shall apply to dispositions made after the date of    the enactment of this Act [Oct. 19, 1980] in taxable years ending    after such date.      "(2) For section 453(e). - Section 453(e) of the Internal Revenue Code of 1986 [formerly I.R.C. 1954] (as amended by section 2) shall apply to first dispositions made after May 14, 1980. "(3) For section 453(h). - Paragraphs (1) and (2) of section   453(h) of such Code (as amended by section 2) shall apply in the    case of distributions of installment obligations after March 31,    1980.      "(4) For section 453a. - Section 453A of the Internal Revenue Code of 1986 (as amended by section 2) shall apply to taxable years ending after the date of enactment of this Act [Oct. 19, 1980].     "(5) For section 453b(f). - Section 453B(f) of the Internal    Revenue Code of 1986 (as amended by section 2) shall apply to    installment obligations becoming unenforceable after the date of    the enactment of this Act [Oct. 19, 1980].      "(6) For section 2(c). - The amendments made by section 2(c) [amending sections 336, 337, 453B, and former section 453 of this title] shall take effect as if included in the amendments made by   section 403(b) of the Crude Oil Windfall Profit Tax Act of 1980 [see section 403(b)(3) of Pub. L. 96-223, set out as an Effective Date of 1980 Amendments note under section 337 of this title]. "(7) Special rule for application of former section 453 to   certain dispositions. - In the case of any disposition made on or    before the date of the enactment of this Act [Oct. 19, 1980] in any    taxable year ending after such date, the provisions of section    453(b) of the Internal Revenue Code of 1986 [see subsec. (b) of    former section 453 of this title, set out below] as in effect    before such date, shall be applied with respect to such disposition    without regard to -         "(A) paragraph (2) of such section 453(b), and "(B) any requirement that more than 1 payment be received."

PLAN AMENDMENTS NOT REQUIRED UNTIL JANUARY 1, 1989 For provisions directing that if any amendments made by subtitle A or subtitle C of title XI [Secs. 1101-1147 and 1171-1177] or   title XVIII [Secs. 1800-1899A] of Pub. L. 99-514 require an   amendment to any plan, such plan amendment shall not be required to    be made before the first plan year beginning on or after Jan. 1, 1989, see section 1140 of Pub. L. 99-514, as amended, set out as a   note under section 401 of this title.

-End-

-CITE- 26 USC Sec. 453A                                           01/07/2011

-EXPCITE- TITLE 26 - INTERNAL REVENUE CODE Subtitle A - Income Taxes CHAPTER 1 - NORMAL TAXES AND SURTAXES Subchapter E - Accounting Periods and Methods of Accounting PART II - METHODS OF ACCOUNTING Subpart B - Taxable Year for Which Items of Gross Income Included

-HEAD- Sec. 453A. Special rules for nondealers

-STATUTE- (a) General rule In the case of an installment obligation to which this section applies - (1) interest shall be paid on the deferred tax liability with respect to such obligation in the manner provided under subsection (c), and (2) the pledging rules under subsection (d) shall apply. (b) Installment obligations to which section applies (1) In general This section shall apply to any obligation which arises from the disposition of any property under the installment method, but only if the sales price of such property exceeds $150,000. (2) Special rule for interest payments For purposes of subsection (a)(1), this section shall apply to     an obligation described in paragraph (1) arising during a taxable year only if - (A) such obligation is outstanding as of the close of such taxable year, and (B) the face amount of all such obligations held by the taxpayer which arose during, and are outstanding as of the close of, such taxable year exceeds $5,000,000.

Except as provided in regulations, all persons treated as a     single employer under subsection (a) or (b) of section 52 shall be treated as one person for purposes of this paragraph and subsection (c)(4). (3) Exception for personal use and farm property An installment obligation shall not be treated as described in     paragraph (1) if it arises from the disposition - (A) by an individual of personal use property (within the       meaning of section 1275(b)(3)), or          (B) of any property used or produced in the trade or business of farming (within the meaning of section 2032A(e)(4) or (5)). (4) Special rule for timeshares and residential lots An installment obligation shall not be treated as described in     paragraph (1) if it arises from a disposition described in      section 453(l)(2)(B), but the provisions of section 453(l)(3) (relating to interest payments on timeshares and residential     lots) shall apply to such obligation. (5) Sales price For purposes of paragraph (1), all sales or exchanges which are part of the same transaction (or a series of related     transactions) shall be treated as 1 sale or exchange. (c) Interest on deferred tax liability (1) In general If an obligation to which this section applies is outstanding as of the close of any taxable year, the tax imposed by this chapter for such taxable year shall be increased by the amount of     interest determined in the manner provided under paragraph (2). (2) Computation of interest For purposes of paragraph (1), the interest for any taxable year shall be an amount equal to the product of - (A) the applicable percentage of the deferred tax liability with respect to such obligation, multiplied by         (B) the underpayment rate in effect under section 6621(a)(2) for the month with or within which the taxable year ends. (3) Deferred tax liability For purposes of this section, the term "deferred tax liability" means, with respect to any taxable year, the product of - (A) the amount of gain with respect to an obligation which has not been recognized as of the close of such taxable year, multiplied by         (B) the maximum rate of tax in effect under section 1 or 11, whichever is appropriate, for such taxable year.

For purposes of applying the preceding sentence with respect to     so much of the gain which, when recognized, will be treated as      long-term capital gain, the maximum rate on net capital gain under section 1(h) or 1201 (whichever is appropriate) shall be     taken into account. (4) Applicable percentage For purposes of this subsection, the term "applicable     percentage" means, with respect to obligations arising in any taxable year, the percentage determined by dividing - (A) the portion of the aggregate face amount of such obligations outstanding as of the close of such taxable year in       excess of $5,000,000, by          (B) the aggregate face amount of such obligations outstanding as of the close of such taxable year. (5) Treatment as interest Any amount payable under this subsection shall be taken into account in computing the amount of any deduction allowable to the taxpayer for interest paid or accrued during the taxable year. (6) Regulations The Secretary shall prescribe such regulations as may be     necessary to carry out the provisions of this subsection including regulations providing for the application of this subsection in the case of contingent payments, short taxable years, and pass-thru entities. (d) Pledges, etc., of installment obligations (1) In general For purposes of section 453, if any indebtedness (hereinafter     in this subsection referred to as "secured indebtedness") is      secured by an installment obligation to which this section applies, the net proceeds of the secured indebtedness shall be     treated as a payment received on such installment obligation as      of the later of - (A) the time the indebtedness becomes secured indebtedness, or         (B) the time the proceeds of such indebtedness are received by the taxpayer. (2) Limitation based on total contract price The amount treated as received under paragraph (1) by reason of     any secured indebtedness shall not exceed the excess (if any) of - (A) the total contract price, over (B) any portion of the total contract price received under the contract before the later of the times referred to in       subparagraph (A) or (B) of paragraph (1) (including amounts        previously treated as received under paragraph (1) but not        including amounts not taken into account by reason of paragraph        (3)). (3) Later payments treated as receipt of tax paid amounts If any amount is treated as received under paragraph (1) with respect to any installment obligation, subsequent payments received on such obligation shall not be taken into account for purposes of section 453 to the extent that the aggregate of such subsequent payments does not exceed the aggregate amount treated as received under paragraph (1). (4) Secured indebtedness For purposes of this subsection indebtedness is secured by an     installment obligation to the extent that payment of principal or      interest on such indebtedness is directly secured (under the      terms of the indebtedness or any underlying arrangements) by any interest in such installment obligation. A payment shall be     treated as directly secured by an interest in an installment obligation to the extent an arrangement allows the taxpayer to     satisfy all or a portion of the indebtedness with the installment obligation. (e) Regulations The Secretary shall prescribe such regulations as may be   necessary to carry out the purposes of this section, including regulations - (1) disallowing the use of the installment method in whole or     in part for transactions in which the rules of this section otherwise would be avoided through the use of related persons, pass-thru entities, or intermediaries, and (2) providing that the sale of an interest in a partnership or     other pass-thru entity will be treated as a sale of the proportionate share of the assets of the partnership or other entity.

-SOURCE- (Added Pub. L. 96-471, Sec. 2(a), Oct. 19, 1980, 94 Stat. 2251;   amended Pub. L. 99-514, title VIII, Sec. 812(b), Oct. 22, 1986, 100    Stat. 2371; Pub. L. 100-203, title X, Sec. 10202(c)[(1)], Dec. 22,    1987, 101 Stat. 1330-390; Pub. L. 100-647, title I, Sec.    1008(g)(2), title II, Sec. 2004(d)(2), (7), (8), title V, Sec.    5076(a), (b)(1), Nov. 10, 1988, 102 Stat. 3442, 3599, 3600, 3682;    Pub. L. 101-239, title VII, Secs. 7812(c)(2), 7815(g), 7821(a)(1)-    (3), (4)(B), Dec. 19, 1989, 103 Stat. 2412, 2420, 2423, 2424; Pub.    L. 103-66, title XIII, Sec. 13201(b)(4), Aug. 10, 1993, 107 Stat.    459; Pub. L. 106-170, title V, Sec. 536(b), Dec. 17, 1999, 113    Stat. 1936.)

-MISC1- PRIOR PROVISIONS Provisions similar to those comprising this section were contained in former section 453 of this title.

AMENDMENTS 1999 - Subsec. (d)(4). Pub. L. 106-170 inserted at end "A payment   shall be treated as directly secured by an interest in an    installment obligation to the extent an arrangement allows the    taxpayer to satisfy all or a portion of the indebtedness with the    installment obligation." 1993 - Subsec. (c)(3). Pub. L. 103-66 inserted at end "For   purposes of applying the preceding sentence with respect to so much    of the gain which, when recognized, will be treated as long-term    capital gain, the maximum rate on net capital gain under section    1(h) or 1201 (whichever is appropriate) shall be taken into    account." 1989 - Subsec. (b)(2)(B). Pub. L. 101-239, Sec. 7821(a)(1), substituted "such obligations held by the taxpayer" for "obligations of the taxpayer described in paragraph (1)". Subsec. (b)(3). Pub. L. 101-239, Sec. 7815(g), substituted "Exception for personal use and farm property" for "Exception for   farm property" in heading and amended text generally. Prior to   amendment, text read as follows: "An installment obligation shall    not be treated as described in paragraph (1) if it arises from the    disposition of any property used or produced in the trade or    business of farming (within the meaning of section 2032A(e)(4) or    (5)."      Pub. L. 101-239, Sec. 7812(c)(2), substituted "(5))." for "(5)." Subsec. (c)(5), (6). Pub. L. 101-239, Sec. 7821(a)(4)(B), added par. (5) and redesignated former par. (5) as (6). Subsec. (d)(1)(B). Pub. L. 101-239, Sec. 7821(a)(3), substituted "the time the proceeds" for "the proceeds". Subsec. (d)(2)(B). Pub. L. 101-239, Sec. 7821(a)(2), substituted "the later of the times referred to in subparagraph (A) or (B) of   paragraph (1)" for "such secured indebtedness was incurred". 1988 - Pub. L. 100-647, Sec. 5076(b)(1), struck out "of real   property" after "rules for nondealers" in section catchline. Subsec. (b)(1). Pub. L. 100-647, Sec. 5076(a), amended par. (1)   generally. Prior to amendment, par. (1) read as follows: "This   section shall apply to any obligation which arises from the    disposition of real property under the installment method which is    property used in the taxpayer's trade or business or property held    for the production of rental income, but only if the sales price of    such property exceeds $150,000." Subsec. (b)(2). Pub. L. 100-647, Sec. 2004(d)(7), inserted "and   subsection (c)(4)" after "of this paragraph" in last sentence. Subsec. (b)(3). Pub. L. 100-647, Sec. 2004(d)(8), substituted "farm property" for "personal use and farm property" in heading and amended text generally. Prior to amendment, text read as follows: "An installment obligation shall not be treated as described in   paragraph (1) if it arises from the disposition -         "(A) by an individual of personal use property (within the      meaning of section 1275(b)(3)), or        "(B) of any property used or produced in the trade or business      of farming (within the meaning of section 2032A(e)(4) or (5))." Subsec. (c). Pub. L. 100-647, Sec. 1008(g)(2), substituted "453(k)" for "453(j)" in subsec. (c) as in effect on date before the date of enactment of Pub. L. 100-203 (Dec. 22, 1987). Subsec. (e). Pub. L. 100-647, Sec. 2004(d)(2), added subsec. (e). 1987 - Pub. L. 100-203 substituted "Special rules for nondealers   of real property" for "Installment method for dealers in personal    property" in section catchline and amended text generally, revising and restating as subsecs. (a) to (d) provisions of former subsecs. (a) to (c). 1986 - Subsec. (a)(2). Pub. L. 99-514, Sec. 812(b)(1), struck out last sentence which read as follows: "This paragraph shall not   apply with respect to sales of personal property under a revolving    credit type plan." Subsec. (c). Pub. L. 99-514, Sec. 812(b)(2), added subsec. (c).

EFFECTIVE DATE OF 1999 AMENDMENT Amendment by Pub. L. 106-170 applicable to sales or other dispositions occurring on or after Dec. 17, 1999, see section 536(c) of Pub. L. 106-170, set out as a note under section 453 of   this title.

EFFECTIVE DATE OF 1993 AMENDMENT Amendment by Pub. L. 103-66 applicable to taxable years beginning after Dec. 31, 1992, see section 13201(c) of Pub. L. 103-66, set out as a note under section 1 of this title.

EFFECTIVE DATE OF 1989 AMENDMENT Amendment by sections 7812(c)(2) and 7815(g) of Pub. L. 101-239 effective, except as otherwise provided, as if included in the provision of the Technical and Miscellaneous Revenue Act of 1988, Pub. L. 100-647, to which such amendment relates, see section 7817 of Pub. L. 101-239, set out as a note under section 1 of this title. Amendment by section 7821(a)(1)-(3), (4)(B) of Pub. L. 101-239 effective as if included in the provision of the Revenue Act of   1987, Pub. L. 100-203, title X, to which such amendment relates, see section 7823 of Pub. L. 101-239, set out as a note under section 26 of this title.

EFFECTIVE DATE OF 1988 AMENDMENT Amendment by section 1008(g)(2) of Pub. L. 100-647 effective, except as otherwise provided, as if included in the provision of   the Tax Reform Act of 1986, Pub. L. 99-514, to which such amendment relates, see section 1019(a) of Pub. L. 100-647, set out as a note under section 1 of this title. Amendment by section 2004(d)(2), (7), (8) of Pub. L. 100-647 effective, except as otherwise provided, as if included in the provisions of the Revenue Act of 1987, Pub. L. 100-203, title X, to   which such amendment relates, see section 2004(u) of Pub. L. 100- 647, set out as a note under section 56 of this title. Section 5076(c) of Pub. L. 100-647 provided that: "(1) In general. - Except as provided in paragraph (2), the   amendments made by this section [amending this section] shall apply    to sales after December 31, 1988.      "(2) Binding contract, etc. - The amendments made by this section shall not apply to any sale on or before December 31, 1990, if - "(A) such sale is pursuant to a written binding contract in     effect on October 21, 1988, and at all times thereafter before      such sale,        "(B) such sale is pursuant to a letter of intent in effect on      October 21, 1988, or        "(C) there is a board of directors or shareholder approval for      such sale on or before October 21, 1988."

EFFECTIVE DATE OF 1987 AMENDMENT Amendment by Pub. L. 100-203 applicable to dispositions in   taxable years beginning after Dec. 31, 1987, with special rules for non-dealers and coordination with Tax Reform Act of 1986, see section 10202(e)(1), (3), (5) of Pub. L. 100-203, set out as a note under section 453 of this title.

EFFECTIVE DATE For effective date, see section 6(a)(4) of Pub. L. 96-471, set out as a note under section 453 of this title.

CERTAIN REPLEDGES PERMITTED Section 6031 of Pub. L. 100-647 provided that: "(a) General Rule. - Section 453A(d) of the 1986 Code (relating   to pledges, etc., of installment obligations) shall not apply to    any pledge after December 17, 1987, of an installment obligation to    secure any indebtedness if such indebtedness is incurred to    refinance indebtedness which was outstanding on December 17, 1987,    and which was secured on such date and all times thereafter before    such refinancing by a pledge of such installment obligation.      "(b) Limitation. - Subsection (a) shall not apply to the extent that the principal amount of the indebtedness resulting from the refinancing exceeds the principal amount of the refinanced indebtedness immediately before the refinancing. "(c) Certain Refinancings Permitted. - For purposes of subsection   (a), if -         "(1) a refinancing is attributable to the calling of      indebtedness by the creditor, and "(2) such refinancing is not with the creditor under the     refinanced indebtedness or a person related to such creditor,    such refinancing shall, to the extent the refinanced indebtedness    qualifies under subsections (a) and (b), be treated as a    continuation of such refinanced indebtedness."

AMENDMENT BY PUB. L. 99-514 TREATED AS CHANGE IN METHOD OF                               ACCOUNTING For provisions requiring change in accounting method in the case of any taxpayer who made sales under revolving credit plan and was on installment method under this section for such taxpayer's last taxable year beginning before Jan. 1, 1987, see section 812(c)(2) of Pub. L. 99-514, set out as an Effective Date of 1986 Amendment note under section 453 of this title.

-End-

-CITE- 26 USC Sec. 453B                                           01/07/2011

-EXPCITE- TITLE 26 - INTERNAL REVENUE CODE Subtitle A - Income Taxes CHAPTER 1 - NORMAL TAXES AND SURTAXES Subchapter E - Accounting Periods and Methods of Accounting PART II - METHODS OF ACCOUNTING Subpart B - Taxable Year for Which Items of Gross Income Included

-HEAD- Sec. 453B. Gain or loss disposition of installment obligations

-STATUTE- (a) General rule If an installment obligation is satisfied at other than its face value or distributed, transmitted, sold, or otherwise disposed of, gain or loss shall result to the extent of the difference between the basis of the obligation and - (1) the amount realized, in the case of satisfaction at other than face value or a sale or exchange, or       (2) the fair market value of the obligation at the time of      distribution, transmission, or disposition, in the case of the distribution, transmission, or disposition otherwise than by sale or exchange.

any gain or loss so resulting shall be considered as resulting from the sale or exchange of the property in respect of which the installment obligation was received. (b) Basis of obligation The basis of an installment obligation shall be the excess of the face value of the obligation over an amount equal to the income which would be returnable were the obligation satisfied in full. (c) Special rule for transmission at death Except as provided in section 691 (relating to recipients of   income in respect of decedents), this section shall not apply to    the transmission of installment obligations at death. (d) Exception for distributions to which section 337(a) applies Subsection (a) shall not apply to any distribution to which section 337(a) applies. (e) Life insurance companies (1) In general In the case of a disposition of an installment obligation by     any person other than a life insurance company (as defined in      section 816(a)) to such an insurance company or to a partnership of which such an insurance company is a partner, no provision of     this subtitle providing for the nonrecognition of gain shall apply with respect to any gain resulting under subsection (a). If     a corporation which is a life insurance company for the taxable year was (for the preceding taxable year) a corporation which was not a life insurance company, such corporation shall, for purposes of this subsection and subsection (a), be treated as     having transferred to a life insurance company, on the last day of the preceding taxable year, all installment obligations which it held on such last day. A partnership of which a life insurance company becomes a partner shall, for purposes of this subsection and subsection (a), be treated as having transferred to a life insurance company, on the last day of the preceding taxable year of such partnership, all installment obligations which it holds at the time such insurance company becomes a partner. (2) Special rule where life insurance company elects to treat income as not related to insurance business Paragraph (1) shall not apply to any transfer or deemed transfer of an installment obligation if the life insurance company elects (at such time and in such manner as the Secretary     may by regulations prescribe) to determine its life insurance company taxable income - (A) by returning the income on such installment obligation under the installment method prescribed in section 453, and (B) as if such income were an item attributable to a       noninsurance business (as defined in section 806(b)(3)). (f) Obligation becomes unenforceable For purposes of this section, if any installment obligation is   canceled or otherwise becomes unenforceable - (1) the obligation shall be treated as if it were disposed of     in a transaction other than a sale or exchange, and (2) if the obligor and obligee are related persons (within the     meaning of section 453(f)(1)), the fair market value of the obligation shall be treated as not less than its face amount. (g) Transfers between spouses or incident to divorce In the case of any transfer described in subsection (a) of   section 1041 (other than a transfer in trust) - (1) subsection (a) of this section shall not apply, and (2) the same tax treatment with respect to the transferred installment obligation shall apply to the transferee as would have applied to the transferor. (h) Certain liquidating distributions by S corporations If - (1) an installment obligation is distributed by an S     corporation in a complete liquidation, and (2) receipt of the obligation is not treated as payment for the stock by reason of section 453(h)(1),

then, except for purposes of any tax imposed by subchapter S, no   gain or loss with respect to the distribution of the obligation shall be recognized by the distributing corporation. Under regulations prescribed by the Secretary, the character of the gain or loss to the shareholder shall be determined in accordance with the principles of section 1366(b).

-SOURCE- (Added Pub. L. 96-471, Sec. 2(a), Oct. 19, 1980, 94 Stat. 2252;   amended Pub. L. 96-471, Sec. 2(c)(3), Oct. 19, 1980, 94 Stat. 2254;    Pub. L. 97-448, title III, Sec. 302, Jan. 12, 1983, 96 Stat. 2398;    Pub. L. 98-369, div. A, title I, Sec. 43(c)(2), title II, Sec.    211(b)(6), title IV, Secs. 421(b)(3), 492(b)(3), July 18, 1984, 98    Stat. 558, 754, 794, 854; Pub. L. 99-514, title VI, Sec. 631(e)(9),    title X, Sec. 1011(b)(1), title XVIII, Sec. 1842(c), Oct. 22, 1986,    100 Stat. 2274, 2389, 2853; Pub. L. 100-647, title I, Sec.    1006(e)(22), Nov. 10, 1988, 102 Stat. 3403; Pub. L. 101-508, title    XI, Sec. 11702(a)(2), Nov. 5, 1990, 104 Stat. 1388-514.)

-MISC1- PRIOR PROVISIONS Provisions similar to those comprising this section were contained in former section 453 of this title.

AMENDMENTS 1990 - Subsec. (d). Pub. L. 101-508 substituted heading for one which read: "Effect of distribution in liquidations to which   section 332 applies" and amended text generally. Prior to   amendment, text read as follows: "If -         "(1) an installment obligation is distributed in a liquidation to which section 332 (relating to complete liquidations of     subsidiaries) applies, and "(2) the basis of such obligation in the hands of the     distributee is determined under section 334(b)(1),    then no gain or loss with respect to the distribution of such    obligation shall be recognized by the distributing corporation." 1988 - Subsec. (h). Pub. L. 100-647 added subsec. (h). 1986 - Subsec. (d). Pub. L. 99-514, Sec. 631(e)(9), amended subsec. (d) generally, substituting "liquidations to which section   332 applies" for "certain liquidations" in heading, striking out par. (1) designation, redesignating subpars. (A) and (B) as pars. (1) and (2), and striking out former par. (2) relating to   liquidations to which section 337 applies. Subsec. (e)(2)(B). Pub. L. 99-514, Sec. 1011(b)(1), substituted "section 806(b)(3)" for "section 806(c)(3)". Subsec. (g). Pub. L. 99-514, Sec. 1842(c), inserted "(other than   a transfer in trust)". 1984 - Subsec. (d)(2). Pub. L. 98-369, Sec. 492(b)(3), struck out "1251(c)," after "1250(a)," in provision following subpar. (B). Pub. L. 98-369, Sec. 43(c)(2), substituted "1254(a), or 1276(a)" for "or 1254(a)". Subsec. (e)(1). Pub. L. 98-369, Sec. 211(b)(6)(A), substituted "section 816(a)" for "section 801(a)". Subsec. (e)(2). Pub. L. 98-369, Sec. 211(b)(6)(B), substituted "as not related to insurance business" for "as investment income" in heading, and in text substituted "as if such income were an item   attributable to a noninsurance business (as defined in section    806(c)(3))" for "if such income would not otherwise be returnable    as an item referred to in section 804(b) or as long-term capital    gain, as if the income on such obligations were income specified in    section 804(b)". Subsec. (g). Pub. L. 98-369, Sec. 421(b)(3), added subsec. (g). 1983 - Subsec. (d)(2). Pub. L. 97-448 substituted "under   subsection (a)" for "under paragraph (1)" in second sentence. 1980 - Subsec. (d). Pub. L. 96-471, Sec. 2(c)(3), inserted last sentence providing that in the case of any installment obligation which would have met the requirements of subpars. (A) and (B) of   par. (2) but for sections 337(f), gain shall be recognized to such corporation by reason of such distribution only to the extent gain would have been recognized under sections 337(f) if such corporation had sold or exchanged such installment obligation on   the date of such distribution.

EFFECTIVE DATE OF 1990 AMENDMENT Amendment by Pub. L. 101-508 effective as if included in the provision of the Technical and Miscellaneous Revenue Act of 1988, Pub. L. 100-647, to which such amendment relates, see section 11702(j) of Pub. L. 101-508, set out as a note under section 59 of   this title.

EFFECTIVE DATE OF 1988 AMENDMENT Amendment by Pub. L. 100-647 effective, except as otherwise provided, as if included in the provision of the Tax Reform Act of   1986, Pub. L. 99-514, to which such amendment relates, see section 1019(a) of Pub. L. 100-647, set out as a note under section 1 of   this title.

EFFECTIVE DATE OF 1986 AMENDMENT Amendment by section 631(e)(9) of Pub. L. 99-514 applicable to   any distribution in complete liquidation, and any sale or exchange, made by a corporation after July 31, 1986, unless such corporation is completely liquidated before Jan. 1, 1987, any transaction described in section 338 of this title for which the acquisition date occurs after Dec. 31, 1986, and any distribution, not in   complete liquidation, made after Dec. 31, 1986, with exceptions and special and transitional rules, see section 633 of Pub. L. 99-514, set out as an Effective Date note under section 336 of this title. Section 1011(c)(1) of Pub. L. 99-514 provided that: "The   amendments made by this section [amending this section and sections    465, 801, 804 to 806, 813, and 815 of this title, enacting    provisions set out as a note under section 801 of this title, and    amending provisions set out as a note under section 806 of this    title] shall apply to taxable years beginning after December 31,    1986." Amendment by section 1842(c) of Pub. L. 99-514 effective, except as otherwise provided, as if included in the provisions of the Tax Reform Act of 1984, Pub. L. 98-369, div. A, to which such amendment relates, see section 1881 of Pub. L. 99-514, set out as a note under section 48 of this title.

EFFECTIVE DATE OF 1984 AMENDMENT Amendment by section 43(c)(2) of Pub. L. 98-369 applicable to   taxable years ending after July 18, 1984, see section 44 of Pub. L.   98-369, set out as an Effective Date note under section 1271 of    this title. Amendment by section 211(b)(6) of Pub. L. 98-369 applicable to   taxable years beginning after Dec. 31, 1983, see section 215 of    Pub. L. 98-369, set out as an Effective Date note under section 801 of this title. Amendment by section 421(b)(3) of Pub. L. 98-369 applicable to   transfers after July 18, 1984, in taxable years ending after such date, subject to election to have amendment apply to transfers after 1983 or to transfers pursuant to existing decrees, see section 421(d) of Pub. L. 98-369, set out as an Effective Date note under section 1041 of this title. Amendment by section 492(b)(3) of Pub. L. 98-369 applicable to   taxable years beginning after Dec. 31, 1983, see section 492(d) of    Pub. L. 98-369, set out as a note under section 170 of this title.

EFFECTIVE DATE OF 1983 AMENDMENT Amendment by Pub. L. 97-448 applicable to dispositions made after Oct. 19, 1980, in taxable years ending after such date, see section 311(a) of Pub. L. 97-448, set out as a note under section 453 of   this title.

EFFECTIVE DATE OF 1980 AMENDMENT For effective date of amendment by Pub. L. 96-471, see section 6(a)(6) of Pub. L. 96-471, set out as an Effective Date note under section 453 of this title.

EFFECTIVE DATE For effective date, see section 6(a)(1), (5) of Pub. L. 96-471, set out as a note under section 453 of this title.

REPEAL OF MODIFICATION OF INSTALLMENT METHOD Pub. L. 106-573, Sec. 2, Dec. 28, 2000, 114 Stat. 3061, provided that: "(a) In General. - Subsection (a) of section 536 of the Ticket to   Work and Work Incentives Improvement Act of 1999 (relating to    modification of installment method and repeal of installment method    for accrual method taxpayers) [Pub. L. 106-170, amending this    section] is repealed effective with respect to sales and other    dispositions occurring on or after the date of the enactment of    such Act[Dec. 17, 1999].      "(b) Applicability. - The Internal Revenue Code of 1986 shall be   applied and administered as if that subsection (and the amendments    made by that subsection) had not been enacted."

PLAN AMENDMENTS NOT REQUIRED UNTIL JANUARY 1, 1989 For provisions directing that if any amendments made by subtitle A or subtitle C of title XI [Secs. 1101-1147 and 1171-1177] or   title XVIII [Secs. 1800-1899A] of Pub. L. 99-514 require an   amendment to any plan, such plan amendment shall not be required to    be made before the first plan year beginning on or after Jan. 1, 1989, see section 1140 of Pub. L. 99-514, as amended, set out as a   note under section 401 of this title.

TREATMENT OF ELECTIONS UNDER SECTION 453B(E)(2) Section 217(b) of Pub. L. 98-369, as amended by Pub. L. 99-514, Sec. 2, Oct. 22, 1986, 100 Stat. 2095, provided that: "If an   election is made under section 453B(e)(2) before January 1, 1984,    with respect to any installment obligation, any income from such    obligation shall be treated as attributable to a noninsurance    business (as defined in section 806(c)(3) of the Internal Revenue    Code of 1986 [formerly I.R.C. 1954])."

-End-

-CITE- 26 USC Sec. 453C                                           01/07/2011

-EXPCITE- TITLE 26 - INTERNAL REVENUE CODE Subtitle A - Income Taxes CHAPTER 1 - NORMAL TAXES AND SURTAXES Subchapter E - Accounting Periods and Methods of Accounting PART II - METHODS OF ACCOUNTING Subpart B - Taxable Year for Which Items of Gross Income Included

-HEAD- Sec. 453C. Repealed.

-MISC1- [Sec. 453C. Repealed. Pub. L. 100-203, title X, Sec. 10202(a)(1), Dec. 22, 1987, 101 Stat. 1330-388].     Section, added Pub. L. 99-514, title VIII, Sec. 811(a), Oct. 22, 1986, 100 Stat. 2365; amended Pub. L. 100-647, title I, Sec. 1008(f)(1)-(5), Nov. 10, 1988, 102 Stat. 3441, 3442, related to   treatment of certain indebtedness as payment on installment obligations.

EFFECTIVE DATE OF REPEAL Repeal applicable to dispositions in taxable years beginning after Dec. 31, 1987, with special rules for dealers and non- dealers, and coordination with Tax Reform Act of 1986, see section 10202(e)(1)-(3), (5) of Pub. L. 100-203, set out as a note under section 453 of this title.

APPLICABILITY OF AMENDMENTS BY PUB. L. 100-203 AND PUB. L. 100-647 Pub. L. 100-647, title I, Sec. 1008(f)(9), Nov. 10, 1988, 102 Stat. 3442, provided that: "For purposes of applying the amendments   made by this subsection [amending this section and provisions set    out below] and the amendments made by section 10202 of the Revenue    Act of 1987 [Pub. L. 100-203, amending sections 56, 381, 453, 453A,    and 691 of this title and repealing this section], the provisions    of this subsection shall be treated as having been enacted    immediately before the enactment of the Revenue Act of 1987 [Dec.    22, 1987]."

EFFECTIVE DATE; ALLOCATION OF INDEBTEDNESS AS PAYMENT ON                         INSTALLMENT OBLIGATION Section 811(c) of Pub. L. 99-514, as amended by Pub. L. 100-647, title I, Sec. 1008(f)(6)-(8), Nov. 10, 1988, 102 Stat. 3442; Pub. L. 105-34, title X, Sec. 1088(a), Aug. 5, 1997, 111 Stat. 959,   provided that: "(1) In general. - Except as otherwise provided in this section,   the amendments made by this section [enacting this section] shall    apply to taxable years ending after December 31, 1986, with respect    to dispositions after February 28, 1986.      "[(2) Repealed. Pub. L. 105-34, title X, Sec. 1088(a), Aug. 5, 1997, 111 Stat. 959.]     "(3) Exception for certain obligations. - In applying the    amendments made by this section to any installment obligation of a    corporation incorporated on January 13, 1928, the following    indebtedness shall not be taken into account in determining the    allocable installment indebtedness of such corporation under    section 453C of the Internal Revenue Code of 1986 (as added by this    section):        "(A) 12 5/8  percent subordinated debentures with a total face amount of $175,000,000 issued pursuant to a trust indenture dated as of September 1, 1985. "(B) A revolving credit term loan in the maximum amount of     $130,000,000 made pursuant to a revolving credit and security      agreement dated as of September 6, 1985, payable in various      stages with final payment due on August 31, 1992.    This paragraph shall also apply to indebtedness which replaces    indebtedness described in this paragraph if such indebtedness does    not exceed the amount and maturity of the indebtedness it replaces.      "(4) Special rule for residential condominium project. - For purposes of applying the amendments made by this section, the term applicable installment obligation (within the meaning of section   453C(e)(1) of the Internal Revenue Code of 1986) shall not include any obligation arising in connection with sales from a residential condominium project - "(A) for which a contract to purchase land for the project was     entered into at least 5 years before the date of the enactment of      this Act,        "(B) with respect to which land for the project was purchased before September 26, 1985, "(C) with respect to which building permits for the project     were obtained, and construction commenced, before September 26,      1985,        "(D) in conjunction with which not less than 80 units of low- income housing are deeded to a tax-exempt organization designated by a local government, and "(E) with respect to which at least $1,000,000 of expenses were     incurred before September 26, 1985.      "(5) Special rule for qualified buyout. - The amendments made by   this section shall apply for taxable years ending after December 31, 1991, to a corporation if - "(A) such corporation was incorporated on May 25, 1984, for the     purpose of acquiring all of the stock of another corporation,        "(B) such acquisition took place on October 23, 1984, "(C) in connection with such acquisition, the corporation     incurred indebtedness of approximately $151,000,000, and        "(D) substantially all of the stock of the corporation is owned directly or indirectly by employees of the corporation the stock of which was acquired on October 23, 1984. "(6) Special rule for sales of real property by dealers. - In the   case of installment obligations arising from the sale of real    property in the ordinary course of the trade or business of the    taxpayer, any gain attributable to allocable installment    indebtedness allocated to any such installment obligations which    arise (or are deemed to arise) -         "(A) in the 1st taxable year of the taxpayer ending after December 31, 1986, shall be taken into account ratably over the 3 taxable years beginning with such 1st taxable year, and "(B) in the 2nd taxable year of the taxpayer ending after     December 31, 1986, shall be taken into account ratably over the 2      taxable years beginning with such 2nd taxable year.      "(7) Special rule for sales of personal property by dealers. - In   the case of installment obligations arising from the sale of    personal property in the ordinary course of the trade or business of the taxpayer, solely for purposes of determining the time for payment of tax and interest payable with respect to such tax - "(A) any increase in tax imposed by chapter 1 of the Internal     Revenue Code of 1986 for the 1st taxable year of the taxpayer      ending after December 31, 1986, by reason of the amendments made      by this section shall be treated as imposed ratably over the 3      taxable years beginning with such 1st taxable year, and        "(B) any increase in tax imposed by such chapter 1 for the 2nd taxable year of the taxpayer ending after December 31, 1986 (determined without regard to subparagraph (A)), by reason of the amendments made by this section shall be treated as imposed ratably over the 2 taxable years beginning with such 2nd taxable year. "(8) Treatment of certain installment obligations. -   Notwithstanding the amendments made by subtitle B of title III    [section 311 of Pub. L. 99-514, amending sections 593, 631, 852,    1201, and 1445 of this title and enacting provisions set out as    notes under sections 631 and 1201 of this title], gain with respect    to installment payments received pursuant to notes issued in    accordance with a note agreement dated as of August 29, 1980, where    -         "(A) such note agreement was executed pursuant to an agreement of purchase and sale dated April 25, 1980, "(B) more than 1/2  of the installment payments of the      aggregate principal of such notes have been received by August      29, 1986, and        "(C) the last installment payment of the principal of such notes is due August 29, 1989, shall be taxed at a rate of 28 percent. "(9) Special rules. - For purposes of section 453C of the 1986   Code (as added by subsection (a)) -         "(A) Revolving credit plans, etc. - The term 'applicable installment obligation' shall not include any obligation arising out of any disposition or sale described in paragraph (1) or (2) of section 453(k) of such Code (as added by section 812(a)). "(B) Certain dispositions deemed made on first day of taxable     year. - In the case of a taxpayer's 1st taxable year ending after      December 31, 1986, dispositions after February 28, 1986, and      before the 1st day of such taxable year shall be treated as made      on such 1st day." [Pub. L. 105-34, title X, Sec. 1088(b), Aug. 5, 1997, 111 Stat. 959, as amended by Pub. L. 105-206, title VI, Sec. 6010(q), July 22, 1998, 112 Stat. 817, provided that: ["(1) In general. - The amendment made by this section [amending   section 811(c) of Pub. L. 99-514, set out above] shall apply to    taxable years beginning more than 1 year after the date of the    enactment of this Act [Aug. 5, 1997].      ["(2) Coordination with section 481. - In the case of any taxpayer required by this section to change its method of   accounting for any taxable year - ["(A) such changes shall be treated as initiated by the     taxpayer,        ["(B) such changes shall be treated as made with the consent of      the Secretary of the Treasury, and ["(C) the net amount of the adjustments required to be taken     into account under section 481(a) of the Internal Revenue Code of      1986 shall be taken into account ratably over the 4 taxable year      period beginning with the first taxable year beginning more than      1 year after the date of the enactment of this Act."]