Installment Sales: Temporary Regulations Inconsistent with Judicial Definition of Payment.

Abstract The U.S. Congress enacted Section 453 as a relief provision for taxpayers who disposed of property in one year but received a substantial portion of the consideration in later years. The Installment Sales Revision Act of 1980 (ISRA) has increased flexibility by eliminating the provision restricting installment reporting to transactions in which payments in the year of sale do not exceed 30 percent of the settling price. Now the installment method is available when- ever there is at least one payment to be collected in a taxable year subsequent to the year of disposition. With the elimination of the 30-percent ceiling, sellers no longer encounter the problem of deter- mining whether a particular deferred payment contract qualifies for Section 453 treatment. Unfortunately, however, the definition of "payment" contained in the ISRA does not adequately address the matter of whether the seller has received a payment in a particular year. Even though the statute no longer limits the amount of the payment which may be received in the year of sale, the issue of what constitutes a payment still holds significance.