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Discussion
As stated, the sole issue for decision is whether
petitioners may deduct interest which they paid pursuant to an
election under section 453(l)(2)(B)(i) (relating to installment
sales of timeshares and residential lots).
Under section 453(b)(2)(A), an installment sale of real
property held for sale to customers in the ordinary course of
business is ineligible for installment sale treatment, since the
sale is treated as a "dealer disposition" as defined in section
453(l)(1)(B). Dispositions of timeshares and residential lots
are excepted from the dealer disposition definition, however, if
the taxpayer elects to have paragraph (3) of section 453(l) apply
to any installment obligations which arise from such
dispositions.
There are conditions attached to the privilege of exercising
the election, the only significant condition for purposes of this
case being the following: the taxpayer must agree to pay an
additional tax, taken into account under section 453(l)(3)(C) as
interest paid or accrued during the taxable year.
The parties stipulated that there is no dispute that Aqua
Sun was in the business of selling residential timeshare units
and was entitled to report income from its residential timeshare
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Last modified: May 25, 2011