- 17 -
note. The Mortgage Deed provided for random releases upon the
payment of $3,300 principal plus accrued interest. Absent from
the Mortgage Deed and the note is any mention of County Bank.
Thus, we conclude that when the transaction was structured and
executed, it was not contingent upon County Bank’s reducing
petitioner’s debt by $174,900.
The agreement was dated December 31, 1990. Therefore, the
sale was made in 1990, and Farm & Grove must recognize income
from the sale in 1990.20
Petitioner’s second timing argument is that the sale should
be recognized under the installment method provided under section
453. For Federal income tax purposes, gain from qualifying
installment sales of property can be reported under the
installment method subject to certain exceptions. Sec.
453(a)(1). Dealer dispositions are excepted from the definition
of “installment sale” by section 453(b)(2)(A). A dealer
disposition includes any disposition of real property which is
held by the taxpayer for sale to customers in the ordinary course
of the taxpayer’s business. Sec. 453(l)(1)(B).
Petitioner does not dispute that Farm & Grove was engaged in
the trade or business of selling real estate. However,
20Farm & Grove did not report any gain from the sale of the
equitable interest in the 53 lots to the partnership on its 1990
Form 1120S, U.S. Income Tax Return for an S Corporation.
Page: Previous 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 NextLast modified: May 25, 2011