Close
Close

Error doesn’t opt S corp out of installment method

RFP
Tax Hot Topics newsletter The IRS ruled in private letter ruling (PLR 201943004) that a taxpayer did not elect out of the installment method under Section 453 when it reported the incorrect amount of proceeds received in the first year of installments.

The taxpayer, an individually owned S corporation, engaged in an installment sale of all of its assets to an unrelated party. Its Form 1120S did not properly report the installment sale on Form 6252 and it also contained posting errors. The amount reported was not the amount realized equal to the full face amount of the installment obligation. The taxpayer’s return preparer represented that its owner had no intention of opting out of the installment method and was under the impression that he only had to report the proceeds received in the first year on the Form 1120S.

The taxpayer wanted installment sale treatment and requested the ruling that reporting an incorrect amount from an installment sale did not result in an election out of the installment method.

Treas. Reg. Sec. 15a.453-1(d)(3)(i) provides that an election out of the installment method requires taxpayers to report an amount realized equal to the selling price, including the full face amount of any installment obligation on the tax return filed for the taxable year in which the installment sale occurs. The IRS ruled that because the taxpayer did not report the amount realized equal to the selling price, including the full face amount in the year the installment sale occurred, it did not make an election out of the installment method of accounting.

Contacts:
Sharon Kay
Partner
Washington National Tax Office
T +1 202 861 4140

John Suttora
Managing Director
Washington National Tax Office
T +1 202 521 1523

Caleb Cordonnier
Manager
Washington National Tax Office
T +1 202 521 1555

Jason Seo
Senior Associate
Washington National Tax Office
T +1 202 521 1556

Tax professional standards statement
This content supports Grant Thornton LLP’s marketing of professional services and is not written tax advice directed at the particular facts and circumstances of any person. If you are interested in the topics presented herein, we encourage you to contact us or an independent tax professional to discuss their potential application to your particular situation. Nothing herein shall be construed as imposing a limitation on any person from disclosing the tax treatment or tax structure of any matter addressed herein. To the extent this content may be considered to contain written tax advice, any written advice contained in, forwarded with or attached to this content is not intended by Grant Thornton LLP to be used, and cannot be used, by any person for the purpose of avoiding penalties that may be imposed under the Internal Revenue Code.

The information contained herein is general in nature and is based on authorities that are subject to change. It is not, and should not be construed as, accounting, legal or tax advice provided by Grant Thornton LLP to the reader. This material may not be applicable to, or suitable for, the reader’s specific circumstances or needs and may require consideration of tax and nontax factors not described herein. Contact Grant Thornton LLP or other tax professionals prior to taking any action based upon this information. Changes in tax laws or other factors could affect, on a prospective or retroactive basis, the information contained herein; Grant Thornton LLP assumes no obligation to inform the reader of any such changes. All references to “Section,” “Sec.,” or “§” refer to the Internal Revenue Code of 1986, as amended.