Category: Corporations; Sales & Exchanges Copyright 1998, The Tax Resource Group. All rights reserved. Telephone 800-578-3498. Internet: www.taxresourcegroup.com I never cease to be amazed at what I don't know about this business. Yes, you are absolutely right that deferred installment sale gain is an ACE adjustment. Internal Revenue Code Section 56(g)(4)(D)(iv). This is the case unless your taxpayer is already paying the interest toll charge for installment sale deferral. I doubt very much that the interest toll charge applies to your client. See Section 453A. Regarding liquidation, Section 336(a) provides that a liquidating corporation recognize gain on distribution of assets in liquidation as if the assets were sold at their fair market value. That clearly triggers installment sale gain. Section 453(h) provides one relief mechanism for distribution of an installment obligation in liquidation of a C corporation. Without this rule, receipt of the obligation would be considered payment in exchange for the shareholder's stock in the year of liquidation to the full extent of the value of the obligation. Section 453(h) allows the shareholder level gain to be recognized as the installments are received provided the conditions of the statute are satisfied. Section 453B(h) prevents triggering of deferred installment gain with respect to certain liquidations of S corporations. Of course, that is not your fact pattern. |
