26 U.S.C. § 453A : US Code - Section 453A: Special rules for nondealers

Search 26 U.S.C. § 453A : US Code - Section 453A: Special rules for nondealers

    (a) General rule
      In the case of an installment obligation to which this section
    applies - 
        (1) interest shall be paid on the deferred tax liability with
      respect to such obligation in the manner provided under
      subsection (c), and
        (2) the pledging rules under subsection (d) shall apply.
    (b) Installment obligations to which section applies
      (1) In general
        This section shall apply to any obligation which arises from
      the disposition of any property under the installment method, but
      only if the sales price of such property exceeds $150,000.
      (2) Special rule for interest payments
        For purposes of subsection (a)(1), this section shall apply to
      an obligation described in paragraph (1) arising during a taxable
      year only if - 
          (A) such obligation is outstanding as of the close of such
        taxable year, and
          (B) the face amount of all such obligations held by the
        taxpayer which arose during, and are outstanding as of the
        close of, such taxable year exceeds $5,000,000.

      Except as provided in regulations, all persons treated as a
      single employer under subsection (a) or (b) of section 52 shall
      be treated as one person for purposes of this paragraph and
      subsection (c)(4).
      (3) Exception for personal use and farm property
        An installment obligation shall not be treated as described in
      paragraph (1) if it arises from the disposition - 
          (A) by an individual of personal use property (within the
        meaning of section 1275(b)(3)), or
          (B) of any property used or produced in the trade or business
        of farming (within the meaning of section 2032A(e)(4) or (5)).
      (4) Special rule for timeshares and residential lots
        An installment obligation shall not be treated as described in
      paragraph (1) if it arises from a disposition described in
      section 453(l)(2)(B), but the provisions of section 453(l)(3)
      (relating to interest payments on timeshares and residential
      lots) shall apply to such obligation.
      (5) Sales price
        For purposes of paragraph (1), all sales or exchanges which are
      part of the same transaction (or a series of related
      transactions) shall be treated as 1 sale or exchange.
    (c) Interest on deferred tax liability
      (1) In general
        If an obligation to which this section applies is outstanding
      as of the close of any taxable year, the tax imposed by this
      chapter for such taxable year shall be increased by the amount of
      interest determined in the manner provided under paragraph (2).
      (2) Computation of interest
        For purposes of paragraph (1), the interest for any taxable
      year shall be an amount equal to the product of - 
          (A) the applicable percentage of the deferred tax liability
        with respect to such obligation, multiplied by
          (B) the underpayment rate in effect under section 6621(a)(2)
        for the month with or within which the taxable year ends.
      (3) Deferred tax liability
        For purposes of this section, the term "deferred tax liability"
      means, with respect to any taxable year, the product of - 
          (A) the amount of gain with respect to an obligation which
        has not been recognized as of the close of such taxable year,
        multiplied by
          (B) the maximum rate of tax in effect under section 1 or 11,
        whichever is appropriate, for such taxable year.

      For purposes of applying the preceding sentence with respect to
      so much of the gain which, when recognized, will be treated as
      long-term capital gain, the maximum rate on net capital gain
      under section 1(h) or 1201 (whichever is appropriate) shall be
      taken into account.
      (4) Applicable percentage
        For purposes of this subsection, the term "applicable
      percentage" means, with respect to obligations arising in any
      taxable year, the percentage determined by dividing - 
          (A) the portion of the aggregate face amount of such
        obligations outstanding as of the close of such taxable year in
        excess of $5,000,000, by
          (B) the aggregate face amount of such obligations outstanding
        as of the close of such taxable year.
      (5) Treatment as interest
        Any amount payable under this subsection shall be taken into
      account in computing the amount of any deduction allowable to the
      taxpayer for interest paid or accrued during the taxable year.
      (6) Regulations
        The Secretary shall prescribe such regulations as may be
      necessary to carry out the provisions of this subsection
      including regulations providing for the application of this
      subsection in the case of contingent payments, short taxable
      years, and pass-thru entities.
    (d) Pledges, etc., of installment obligations
      (1) In general
        For purposes of section 453, if any indebtedness (hereinafter
      in this subsection referred to as "secured indebtedness") is
      secured by an installment obligation to which this section
      applies, the net proceeds of the secured indebtedness shall be
      treated as a payment received on such installment obligation as
      of the later of - 
          (A) the time the indebtedness becomes secured indebtedness,
        or
          (B) the time the proceeds of such indebtedness are received
        by the taxpayer.
      (2) Limitation based on total contract price
        The amount treated as received under paragraph (1) by reason of
      any secured indebtedness shall not exceed the excess (if any) of -
       
          (A) the total contract price, over
          (B) any portion of the total contract price received under
        the contract before the later of the times referred to in
        subparagraph (A) or (B) of paragraph (1) (including amounts
        previously treated as received under paragraph (1) but not
        including amounts not taken into account by reason of paragraph
        (3)).
      (3) Later payments treated as receipt of tax paid amounts
        If any amount is treated as received under paragraph (1) with
      respect to any installment obligation, subsequent payments
      received on such obligation shall not be taken into account for
      purposes of section 453 to the extent that the aggregate of such
      subsequent payments does not exceed the aggregate amount treated
      as received under paragraph (1).
      (4) Secured indebtedness
        For purposes of this subsection indebtedness is secured by an
      installment obligation to the extent that payment of principal or
      interest on such indebtedness is directly secured (under the
      terms of the indebtedness or any underlying arrangements) by any
      interest in such installment obligation. A payment shall be
      treated as directly secured by an interest in an installment
      obligation to the extent an arrangement allows the taxpayer to
      satisfy all or a portion of the indebtedness with the installment
      obligation.
    (e) Regulations
      The Secretary shall prescribe such regulations as may be
    necessary to carry out the purposes of this section, including
    regulations - 
        (1) disallowing the use of the installment method in whole or
      in part for transactions in which the rules of this section
      otherwise would be avoided through the use of related persons,
      pass-thru entities, or intermediaries, and
        (2) providing that the sale of an interest in a partnership or
      other pass-thru entity will be treated as a sale of the
      proportionate share of the assets of the partnership or other
      entity.