Changing an Installment Sale Election

When one or more payments for the sale of property (other than types that are exempted) are received after the year of the sale, the installment method automatically applies. This means capital gain are spread over the years in which payments are received. But an election can be made to report the entire gain in the year of the sale. If the election is made, a change back to installment reporting can only be made with IRS permission. That’s what happened to a couple who sold their business, as well as personally-owned property associated with it. Their accountant for the year of the sale elected out, but a new accountant for the following year showed them the election out had been a bad idea. Fortunately, the IRS allowed them to revoke their election out of the installment method so they can then use the installment method. #IdeaoftheDay