Basic Federal Income Taxation: Timing: Installment Sales: Second Dispositions by Related Parties and Contingent Payments

This lesson is best used after studying Federal Income Taxation: Basic Federal Income Taxation: Timing: Installment Sales: Second Dispositions by Related Parties and Contingent Payments in class. The lesson includes problem sets to work through, allowing you to apply sub-sections of section 453 of the Code and Regs. to a variety of situations involving certain types of installment sales.

Learning Outcomes

On completion of the lesson, the student will be able to:

1. Describe the consequences if a taxpayer enters into an installment sale with a related party (first disposition) and the related party subsequently sells the purchased asset (second disposition).
2. Compute the amount of the accelerated payment treated as received by the taxpayer on a second disposition.
3. Explain the relationship of open transaction treatment and the § 453 contingent payment regulations.
4. Identify the three approaches the § 453 regulations take with respect to contingent payments.
5. Use the § 453 regulations to calculate the gain for contingent payments received when there is a maximum sales price; a fixed number of years; or neither a maximum sales price nor fixed number of years.