Installment Sales Reporting Under Section 453: Avoiding Pitfalls
Contingent, Related Party, Depreciation Recapture, and Large Installment Sales
Course Details
- smart_display Format
On-Demand
- signal_cellular_alt Difficulty Level
Intermediate
- work Practice Area
Tax Preparer
- event Date
Thursday, February 18, 2021
- schedule Time
1:00 p.m. ET./10:00 a.m. PT
- timer Program Length
110 minutes
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BARBRI is a NASBA CPE sponsor and this 110-minute webinar is accredited for 2.0 CPE credits.
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BARBRI is an IRS-approved continuing education provider offering certified courses for Enrolled Agents (EA) and Tax Return Preparers (RTRP).
This course will address the various tax issues surrounding use of the installment sales method of reporting (“installment method”) on the sale of property. Unique scenarios affecting use of the installment method will also be discussed, including contingent payments, depreciation recapture, sales between related parties, among others, as well as electing out of the installment method. The webinar will provide an overview of installment sales, the benefits, risks and alternatives to the installment method and how sellers should report installment sales for federal tax purposes.
Mr. Bridgers' practice encompasses all areas of private wealth and family business. In addition to estate planning and estate administration, he is experienced in mergers and acquisitions, taxation, business transactions, franchising, commercial contracts, asset protection, executive compensation, employee benefits, qualified and non-qualified retirement plans, and nonprofit organizations. He counsels closely-held and family businesses, and nonprofit organizations, with their planning, succession, and liquidity needs in a variety of industries including tech, restaurant and retail, healthcare, manufacturing, construction, real estate, financial services, consulting, and professional staffing.
Mr. Escatel brings extensive experience and close personal attention to the representation of businesses and individuals in a broad range of tax matters, both as an advisor and as an advocate. He has an established track record of successfully representing his clients in significant income tax, sales and use tax, and employment tax issues before the IRS, the California Franchise Tax Board, and various administrative and local taxing agencies. Further, Mr. Escatel is certified as a Tax Specialist by the State Bar of California Board of Legal Specialization.
Mr. Lee has a multistate practice that focuses on tax, trust and estates. He advises clients on domestic and international tax matters, including tax planning with respect to their structures, transactions, and estate planning matters. Mr. Lee has experience advising on issues relating to tax deferral strategies, tax treaties, pre-immigration planning for foreigners moving to the U.S., expatriation planning, tax planning for foreign companies doing business in the U.S., and both domestic and non-resident alien estate planning. He is regularly invited to speak at seminars sponsored by large financial institutions, including New York Life, Prudential AXA, MetLife, and Mass Mutual, as well as, the Korean American CPA Association.
An installment sale under Section 453 of the Internal Revenue Code involves the disposition of property (real or personal) where at least one payment from the disposition is received by the seller after the tax year in which the disposition occurs. An installment sale requires the seller to use the installment method under Section 453 to report the gain from the sale of property unless the seller elects out of the installment method.
Sellers contemplating an installment sale should consider the installment method to report the proceeds from a sale of property as the installment method typically provides favorable tax treatment as the seller only pays tax on the profits from an installment sale as payments are received rather than the entire tax due in the year of the sale; essentially deferring the tax! When contemplating using the installment method, sellers should also be aware of the restrictions and potential pitfalls in order to avoid having to pay the total tax due in the year of the installment sale.
Listen as our panel of tax experts explains the benefits and caveats of installment sales reporting, including who is required to use this method, who is precluded from deferring gains, how recapture is taxed, and tips for dealing with delayed reporting of gains under Section 453.
- Use of the installment method: an overview
- Calculation of taxes on installment payments
- Electing out of the installment method
- Contingent payments in installment sales
- Installment sales between related parties
- Property ineligible for installment sale reporting
- Depreciation recapture issues
- Self-Cancelling Installment Notes (SCINs)
- Structured installment sales transactions
- Filling out Federal Form 6252 – Installment Sale Income
The panel will discuss these and other critical issues:
- Who is allowed to use the installment method and when?
- Are there transactions ineligible for reporting gain on the installment method?
- Is there a way to mitigate the recognition of gain for depreciation recapture on installment sales?
- What are the tax rules for contingent payment sales and how do they apply?
- What are the related party considerations in installment sales?
- What is the interest charge for installment sale obligations over $5,000,000?
Learning Objectives
After completing this course, you will be able to:
- Determine what constitutes an installment sale under IRC 453
- Ascertain the procedure for opting out of IRC 453
- Identify the impact of contingent sales on installment sales provisions
- Establish the computation of gain on installment sales
- Verify that Form 6252 is properly completed and filed
- Field of Study: Taxes
- Level of Knowledge: Intermediate
- Advance Preparation: None
- Teaching Method: Seminar/Lecture
- Delivery Method: Group-Internet (via computer)
- Attendance Monitoring Method: Attendance is monitored electronically via a participant's PIN and through a series of attendance verification prompts displayed throughout the program
- Prerequisite:
Three years+ business or tax firm experience at mid-level within the organization, preparing complex tax forms and schedules. Specific knowledge and understanding of installment sales, contingent payments, computation of gains, interest charges, electing out of installment sale treatment; familiarity with property ineligible for installment sale treatment, IRS Form 6252, and structured installment sales transactions.
Strafford Publications, Inc. is registered with the National Association of State Boards of Accountancy (NASBA) as a sponsor of continuing professional education on the National Registry of CPE Sponsors. State boards of Accountancy have final authority on the acceptance of individual courses for CPE Credits. Complaints regarding registered sponsons may be submitted to NASBA through its website: www.nasbaregistry.org.
Strafford is an IRS-approved continuing education provider offering certified courses for Enrolled Agents (EA) and Tax Return Preparers (RTRP).
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