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be allocated to the taxable years in which payment may
be received under the agreement in equal annual
increments. * * * If in any taxable year no payment
is received or the amount of payment received
(exclusive of interest) is less than the basis
allocated to that taxable year, no loss shall be
allowed unless the taxable year is the final payment
year under the agreement * * *.
In short, section 15A.453-1(c)(3)(i), Temporary Income Tax Regs.,
supra, provides that, in the case of an installment sale in which
the maximum selling price cannot be determined, but the period
over which payments are to be received is fixed, the taxpayer's
basis shall be allocated equally over the taxable years in which
payments may be received under the installment sale agreement.
Depending upon the particular terms of an otherwise valid
installment sale, the ratable basis recovery rules may have the
effect of accelerating the recognition of income on a CINS
transaction while deferring the recognition of losses. See sec.
15A.453-1(c)(7), Temporary Income Tax Regs., 46 Fed. Reg. 10709
(Feb. 4, 1981). However, the ratable basis recovery rules are
not inflexible, as explained in the preamble to the regulation,
T.D. 7768, which states in pertinent part:
Because the rules set forth in these regulations
may not provide a schedule of basis recovery which is
reasonable for every contingent transaction, these
regulations provide that a taxpayer may use an
alternative method of basis recovery where the rules in
the regulations would substantially and inappropriately
defer basis recovery. These regulations also provide
that when the general rules would substantially and
inappropriately accelerate bases recovery, the Service
may require a different method of basis recovery.
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