Definition
Tax accounting method for seller-financed properties recognizing gain as payments are received.
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Gain deferred to years payments received rather than year of sale. Reduces immediate tax burden. Payments spread tax liability. Gross profit percentage applied to each payment. Interest income separately reported. Professional accounting required. Election available for most sales. Exception for dealer property. Form 6252 reports installment gains. Beneficial for spreading gain. Reduces immediate tax spike. Professional tax guidance critical. Complex calculations require expertise.
Pro Tip
Installment sales defer gains reducing immediate tax burden.
Example
Installment sale recognized gain as buyer made annual payments.