Think Twice Before Opting Out of Installment Reporting

If you receive at least one payment from a sale in a year after the sale, you automatically report your gain on the installment method—a portion is reported as payments are received. You can opt out by reporting all of the gain in the year of the sale, without regard to payment(s) received. But once you opt out, that’s it. In a recent case, a business owner sold 3 of his S corporations and received two promissory notes for payment. He initially reported all of the gain in the year of the sale, but later filed an amended return seeking installment method treatment. The Tax Court said he couldn’t revoke his election out of installment reporting. Note: The IRS may grant relief if there is a mistake, but that didn’t happen here. #IdeaoftheDay

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