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Installment Sales Income Interest on Deferred Tax

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Installment Sales Income Interest on Deferred Tax


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.

How to report the interest. The interest is not figured on Form 6252. See Pub. 537 for details on how to report the interest.

Additional Information

See Pub. 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.


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Views: 1134 Created on: Jun 15, 2013
Date updated: Sep 21, 2015

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