Definition
A sale where payment is received over time, allowing gain recognition to be spread across multiple years.
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Installment sales defer capital gains tax by spreading gain recognition. Interest must be charged on deferred payments. Buyer makes annual payments.
Pro Tip
Installment sales defer taxes but require buyer creditworthiness for payments.
Example
Selling property for $500,000 with $100,000 down and $100,000/year for 4 years, spreading gain.