Interest on Deferred Tax
Generally, interest must be paid 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.
Interest must be paid 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:
Personal use property by an individual,
Real property in tax years beginning before 1988, or
Personal property before 1989.
How to Report the Interest
The interest is not figured on Form 6252. See section 453A to figure the interest. Enter the interest as an additional tax on your tax return. Include it in the amount to be entered on the total tax line after credits and other taxes. For individuals, this is line 60 of the Form 1040. For corporations, it is line 11 of Schedule J (Form 1120). Write "Section 453A(c) interest" to the left of the amount.
Corporations may deduct the interest in the year it is paid or accrued. For individuals and other taxpayers, this interest is not deductible.
See Publication 537 for additional information, including details about reductions in selling price, the single sale of several assets, like-kind exchanges, dispositions of installment obligations, and repossessions.