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respect to the sale of the shares by increasing the basis claimed
for the shares from $45,000 to $116,528. Petitioners
subsequently filed an amendment to the amended return claiming a
basis of $116,504 for the shares.
OPINION
The first issue we must decide is whether petitioners, for
taxable year 1989, must recognize a capital gain2 pursuant to the
installment sale provisions of section 453 on the disposition of
the shares. As a general matter, an installment sale is a
disposition of property where one payment is to be received after
the close of the year in which the disposition occurs. Sec.
453(b)(1).3 Income from an installment sale is to be taken into
account using the installment method, unless a taxpayer elects
not to have the method apply. Sec. 453(a), (d). The installment
method requires gain from the disposition to be recognized for
payments received in a taxable year in the same proportion that
the gross profit (realized or to be realized when payment is
completed) bears to the total contract price. Sec. 453(c).
2
Respondent does not contest petitioners' characterization of
their gain as capital gain.
3
Sec. 453(b)(1) provides:
(1) In general.--The term “installment sale” means a
disposition of property where at least 1 payment is to
be received after the close of the taxable year in
which the disposition occurs.
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