26 U.S.C. § 483 : US Code - Section 483: Interest on certain deferred payments

Search 26 U.S.C. § 483 : US Code - Section 483: Interest on certain deferred payments

(a) Amount constituting interest
For purposes of this title, in the case of any payment -
(1) under any contract for the sale or exchange of any
property, and
(2) to which this section applies,
there shall be treated as interest that portion of the total
unstated interest under such contract which, as determined in a
manner consistent with the method of computing interest under
section 1272(a), is properly allocable to such payment.
(b) Total unstated interest
For purposes of this section, the term "total unstated interest"
means, with respect to a contract for the sale or exchange of
property, an amount equal to the excess of -
(1) the sum of the payments to which this section applies which
are due under the contract, over
(2) the sum of the present values of such payments and the
present values of any interest payments due under the contract.
For purposes of the preceding sentence, the present value of a
payment shall be determined under the rules of section 1274(b)(2)
using a discount rate equal to the applicable Federal rate
determined under section 1274(d).
(c) Payments to which subsection (a) applies
(1) In general
Except as provided in subsection (d), this section shall apply
to any payment on account of the sale or exchange of property
which constitutes part or all of the sales price and which is due
more than 6 months after the date of such sale or exchange under
a contract -
(A) under which some or all of the payments are due more than
1 year after the date of such sale or exchange, and
(B) under which there is total unstated interest.
(2) Treatment of other debt instruments
For purposes of this section, a debt instrument of the
purchaser which is given in consideration for the sale or
exchange of property shall not be treated as a payment, and any
payment due under such debt instrument shall be treated as due
under the contract for the sale or exchange.
(3) Debt instrument defined
For purposes of this subsection, the term "debt instrument" has
the meaning given such term by section 1275(a)(1).
(d) Exceptions and limitations
(1) Coordination with original issue discount rules
This section shall not apply to any debt instrument for which
an issue price is determined under section 1273(b) (other than
paragraph (4) thereof) or section 1274.
(2) Sales prices of $3,000 or less
This section shall not apply to any payment on account of the
sale or exchange of property if it can be determined at the time
of such sale or exchange that the sales price cannot exceed
$3,000.
(3) Carrying charges
In the case of the purchaser, the tax treatment of amounts paid
on account of the sale or exchange of property shall be made
without regard to this section if any such amounts are treated
under section 163(b) as if they included interest.
(4) Certain sales of patents
In the case of any transfer described in section 1235(a)
(relating to sale or exchange of patents), this section shall not
apply to any amount contingent on the productivity, use, or
disposition of the property transferred.
(e) Maximum rate of interest on certain transfers of land between
related parties
(1) In general
In the case of any qualified sale, the discount rate used in
determining the total unstated interest rate under subsection (b)
shall not exceed 6 percent, compounded semiannually.
(2) Qualified sale
For purposes of this subsection, the term "qualified sale"
means any sale or exchange of land by an individual to a member
of such individual's family (within the meaning of section
267(c)(4)).
(3) $500,000 limitation
Paragraph (1) shall not apply to any qualified sale between
individuals made during any calendar year to the extent that the
sales price for such sale (when added to the aggregate sales
price for prior qualified sales between such individuals during
the calendar year) exceeds $500,000.
(4) Nonresident alien individuals
Paragraph (1) shall not apply to any sale or exchange if any
party to such sale or exchange is a nonresident alien individual.
(f) Regulations
The Secretary shall prescribe such regulations as may be
necessary or appropriate to carry out the purposes of this section
including regulations providing for the application of this section
in the case of -
(1) any contract for the sale or exchange of property under
which the liability for, or the amount or due date of, a payment
cannot be determined at the time of the sale or exchange, or
(2) any change in the liability for, or the amount or due date
of, any payment (including interest) under a contract for the
sale or exchange of property.
(g) Cross references
(1) For treatment of assumptions, see section l274(c)(4).
(2) For special rules for certain transactions where stated
principal amount does not exceed $2,800,000, see section 1274A.
(3) For special rules in case of the borrower under certain
loans for personal use, see section 1275(b).