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II. Contingent Installment Sale Provisions
Section 453(a) provides the general rule that income from an
installment sale shall be taken into account for purposes of
title 26 under the installment method of accounting. Section
453(b)(1) defines the term "installment sale" as 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.
Section 453(k)(2) provides that subsection (a) shall not apply to
an installment obligation arising out of a sale of stock or
securities which are traded on an established securities market
or, to the extent provided in regulations, property (other than
stock or securities) of a kind regularly traded on an established
market.
Section 453(j)(2) provides that the Secretary shall
prescribe regulations providing for ratable basis recovery in
transactions where the gross profit or the total contract price
or both cannot be readily ascertained. Pursuant to this
authority, the Secretary promulgated the ratable basis recovery
rules under section 15A.453-1(c)(3)(i), Temporary Income Tax
Regs., 46 Fed. Reg. 10711 (Feb. 4, 1981), which provides in
pertinent part:
When a stated maximum selling price cannot be
determined as of the close of the taxable year in which
the sale or other disposition occurs, but the maximum
period over which payments may be received under the
contingent sale price agreement is fixed, the
taxpayer's basis (inclusive of selling expenses) shall
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