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Installment Sales Income Interest on Deferred Tax

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Question
Installment Sales Income Interest on Deferred Tax

Answer

Interest on Deferred Tax

Generally, you must pay interest on the deferred tax related to any obligation that arises during a tax year from the disposition of property under the installment method if:

  • The property had a sales price over $150,000, and
  • The aggregate balance of all nondealer installment obligations arising during, and outstanding at the close of, the tax year is more than $5 million.

 

You must pay interest in subsequent years if installment obligations that originally required interest to be paid are still outstanding at the close of a tax year.

The interest rules do not apply to dispositions of:

  •  Farm property
  • Personal use property by an individual,
  • Real property before 1988, or
  • Personal property before 1989.

See section 453(l) for more information on the sale of timeshares and residential lots under the installment method

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Views: 417 Created on: Jun 15, 2013
Date updated: Sep 08, 2015

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