Question

4. Which of the following statements regarding installment sales is/are correct? 1. The contract should specify a rate of interest at least equal to the applicable federal rate or it will be imputed. 2. Installment sales tax treatment is automatic unless the taxpayer elects otherwise. 3. Installment sales tax treatment applies to both gains and losses. 4. The taxpayer may use the installment method only if the amount received in the year of sale exceeds 20% of the sales price. 1 and 2 only. d. 1, 2, and 4 only. 3 and 4 only. e. 1,2,3, and 4. 2 and 3 only. a. b. C.

Answer 1

sol! (1). It is correct because payments recived are subject to the imputed interest rules. unless the parties specify that the payments include interest at a rate at least equal to the AFR (2). It is comiect because of a sele is eligible installment method reporting is automatic unless seller elects out by reporting the full gain on a timely filled reatcorn. (3). It 95 correct because installment Sales tax treatment does not apply to losses, which must be taken in the year of sale under the closed transaction method or later of the open transaction method is used (4). It is in connect because taxpayer may we installment method only of at least one payment received after taxable year. so option (a) is correct. (a) land 2 only.