What requirements have to be met to use an Installment Method of reporting?
Taxpayers, other than dealers in personal property, who wish to use the installment method of reporting to report the gain from the sale or dispositiion of property, must strictly meet the IRS requirements set forth in Code Section 453.
The IRS has specified the following requirements as follows;
1. There must be a sale of Property (as opposed to a sale of Services).
2. The Property must not be of a kind that is required to be included in inventory of the taxpayer.
3. There must be an actual installment sale! The IRS has stated that for a sale to be considered an installment sale, "at least one payment must be received in a tax year other than the year of the sale."
If a taxpayer satisfies the above conditions the installment sale treatment is automatic.