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
Form 6252 Instructions