IRC §453 · 26 U.S.C. §453
IRC §453: Installment Method
IRC §453 lets sellers report gain as payments arrive instead of all in the sale year — each payment part basis recovery, part gain, part interest. At least one payment must fall in a later year. Publicly traded securities don't qualify.
What it governs
- Eligible property: real estate and business sales — not inventory or public stock
- Gain ratio computed per payment as cash arrives
- Interest charged on large deferred tax liabilities
- Depreciation recapture taxed in the sale year, before installment cash
In the GuideFull treatment in Chapter 5 of the Guide — THE TAX CUTTERY® Guide to Federal Income Taxation, Professional Edition (564 pages, 24 chapters).
From the practiceSpreading gain: installment sales →
Questions this section answers
- Does the installment method avoid depreciation recapture?
- No — recapture is generally taxed as ordinary income in the sale year, before installment cash arrives.
- Can I elect out of installment treatment?
- Yes, but the election out generally locks in — decide with the math done, not after.
- What happens if the buyer defaults?
- Repossession rules apply with their own gain math — the note terms and security decide how bad the unwinding is.
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The Guide treats 149 Code sections across 24 chapters — every claim verified against primary sources.
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