Installment Tax Correction Act good for flippers? - Posted by Steve (Ca)
Posted by Steve (Ca) on February 12, 2002 at 02:55:52:
According to IRS pub 553:
For sales occurring after December 16, 1999, accrual
basis taxpayers were required to report installment sales
under the accrual method of accounting. The Installment
Tax Correction Act of December 28, 2000, repealed that
If you entered into an installment sale after December
16, 1999, and filed an income tax return by April 16, 2001,
reporting the sale on an accrual method, you have IRS
approval to revoke your effective election out of the installment method.
To revoke the election, you must file an amended return
for the year of the installment sale (and any other year
affected by the sale), reporting the gain on the installment
method. You generally have 3 years from the due date of
the original return to file an amended return.
For more information on installment sales, see Publication 537, Installment Sales.
Would this indicate that flippers (classified by IRS as ‘dealers’) can sell using Land Contracts and carrying notes without having to pay tax on full face value of gain in year of sale? I’m not sure what ‘accrual basis’ means - hence my question.