Installment sales logs are as follows: whenever a taxpayer can carry forward a tax debt at no cost to the taxpayer, it is an economic benefit – the taxpayer has money that he can invest in the meantime, which would otherwise have been paid into the U.S. Treasury. For example, if the seller has a tax debt of $150,000 on a profit of $1,000,000, distributing that profit over 10 years and investing in the meantime would result in a net benefit (even excluding compound interest) of $33,750. ($15,000 carried forward for one year @ 5% = $750; $15,000 carried forward for two years = $1500; for three years = $2250 and so on.) The tempestration seller of real estate that is not used in a business or transaction may choose a instalment payment method to report the capital gain on the sale of real estate. IRS Tax Topic 705 provides an overview of the tax treatment of tempered sales. IrS Publication 537 provides more detailed instructions, including the calculation of the gross margin of the transaction, the percentage of gross margin applicable to each tranche and sales revenue. Payments received by the seller at times during each tax year consist of three components for tax purposes: savings income (either shown or charged to the current federal rate), which is taxed at the standard rate of income; the tax-free return of the adapted base in the property; and profits from the sale taxed at capital gains rates. (IRS Publication 225 provides a detailed explanation of the tax impact of the sale on agricultural real estate.) The instalment payment method is only used in situations where ownership is not fully transferred at the time of sale. In addition, the method is used in case of uncertainty as to the amount recovered (it would therefore be inappropriate to record all revenue at the time of sale).
An example of such a transaction is when a customer buys a car for about R500,000. He must pay the purchase price in instalments. Interest is collected, payment is deferred and the property is reserved until final payment. The customer will pay the purchase price R500,000, plus interest in instalments, until the full amount is paid to the seller to allow the transfer of ownership. Second, the parties need the professional advice of their respective lawyers to structure and document a instalment payment transaction that protects the conservation organization`s investment in the property as well as the seller`s interests, including tax planning objectives. . . .