valuation
installment sale
An installment sale is a sale in which the seller receives at least part of the price in payments after the year of sale, often through seller financing. For federal income tax purposes, the seller may generally report the gain proportionally as payments are received, rather than all at once, spreading out the tax. Some types of gain, such as depreciation recapture, may not qualify for deferral.
- Exam tip
- Installment sales defer tax by recognizing gain as payments come in. A 1031 exchange defers gain by reinvesting in like-kind property; don't confuse the two.
- Example
- A seller sells land for $500,000, receiving $100,000 down and the rest over 8 years, reporting gain each year as payments arrive.
Related terms & state variants
Sources
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Last verified: 2026-10-23