Editorial Notes
Prior Provisions
A prior section 453, acts Aug. 16, 1954, ch. 736, 68A Stat. 154; Sept. 2, 1958, Pub. L. 85–866, title I, § 27(a), 72 Stat. 1624; Oct. 16, 1962, Pub. L. 87–834, § 13(f)(5), 76 Stat. 1035; Feb. 26, 1964, Pub. L. 88–272, title II, §§ 222(a), 231(b)(5), 78 Stat. 75, 105; Aug. 22, 1964, Pub. L. 88–484, § 1(b)(2), 78 Stat. 597; Aug. 31, 1964, Pub. L. 88–539, § 3(a), (b), 78 Stat. 746; Sept. 12, 1966, Pub. L. 89–570, § 1(b)(5), 80 Stat. 762; Nov. 13, 1966, Pub. L. 89–809, title II, § 202(c), 80 Stat. 1576; Dec. 30, 1969, Pub. L. 91–172, title II, § 211(b)(5), title III, § 301(b)(7), title IV, § 412(a), title IX, § 916(a), 83 Stat. 570, 585, 608, 723; Oct. 4, 1976, Pub. L. 94–455, title II, § 205(c)(1)(E), title XIX, §§ 1901(a)(66), 1906(b)(13)(A), 1951(b)(7)(A), 90 Stat. 1535, 1775, 1834, 1838; Nov. 6, 1978, Pub. L. 95–600, title VII, § 703(j)(3), 92 Stat. 2941; Apr. 1, 1980, Pub. L. 96–222, title I, § 104(a)(4)(H)(iv), 94 Stat. 217; Apr. 2, 1980, Pub. L. 96–223, title IV, § 403(b)(2)(B), 94 Stat. 305; Oct. 19, 1980, Pub. L. 96–471, § 2(c)(4), 94 Stat. 2254, related to installment method in general, installment method for dealers in personal property, and gain or loss dispositions of installment obligations, prior to repeal by Pub. L. 96–471, § 2(a), Oct. 19, 1980, 94 Stat. 2247. See sections 453A and 453B of this title.
Amendments
2004—Subsec. (f)(4)(B). Pub. L. 108–357 struck out “is issued by a corporation or a government or political subdivision thereof and” before “is readily tradable”.
2000—Subsecs. (a), (d)(1), (i)(1), (k). Pub. L. 106–573 repealed Pub. L. 106–170, § 536(a). See 1999 Amendment notes below.
1999—Subsec. (a). Pub. L. 106–170, § 536(a)(1), which substituted “Use of installment method” for “General rule” in subsec. heading, designated existing provisions as par. (1) and inserted heading, and added heading and text of par. (2), text of which read as follows: “(2) Accrual method taxpayer.—The installment method shall not apply to income from an installment sale if such income would be reported under an accrual method of accounting without regard to this section. The preceding sentence shall not apply to a disposition described in subparagraph (A) or (B) of subsection (l)(2).”, was repealed by Pub. L. 106–573, § 2(a). See Effective Date and Construction of 2000 Amendment note below.
Subsecs. (d)(1), (i)(1), (k). Pub. L. 106–170, § 536(a)(2), which substituted “(a)(1)” for “(a)” wherever appearing, was repealed by Pub. L. 106–573. See Effective Date and Construction of 2000 Amendment note below.
1988—Subsec. (f)(1). Pub. L. 100–647, § 1018(u)(25), substituted “subsections (g)” for “subsection (g)”.
Subsec. (f)(8). Pub. L. 100–647, § 1018(u)(26), substituted “payments to be” for “payment to be”.
Subsec. (g)(1). Pub. L. 100–647, § 1006(i)(2)(B), struck out “(within the meaning of section 1239(b))” after “between related persons”.
Pub. L. 100–647, § 1006(i)(1), added subpars. (A) to (C) and struck out former subpars. (A) and (B) which read as follows:
“(A) subsection (a) shall not apply, and
“(B) for purposes of this title—
“(i) except as provided in clause (ii), all payments to be received shall be treated as received in the year of the disposition, and
“(ii) in the case of any payments which are contingent as to amount but with respect to which the fair market value may not be reasonably ascertained—
“(I) the basis shall be recovered ratably, and
“(II) the purchaser may not increase the basis of any property acquired in such sale by any amount before such time as the seller includes such amount in income.”
Subsec. (g)(3). Pub. L. 100–647, § 1006(i)(2)(A), added par. (3).
Subsec. (h)(1)(B). Pub. L. 100–647, § 1006(e)(7)(A), substituted “to 1 person in 1 transaction” for “to one person” in concluding provisions.
Subsec. (h)(1)(E). Pub. L. 100–647, § 1006(e)(7)(B), substituted “section 368(c)” for “section 368(c)(1)”.
Subsec. (j). Pub. L. 100–647, § 1008(g)(1), redesignated subsec. (j), relating to current inclusion in case of revolving credit plans, etc., as (k).
Subsec. (k). Pub. L. 100–647, § 2004(d)(5), struck out “and section 453A” after “subsection (a)” in second sentence.
Pub. L. 100–647, § 1008(g)(1), redesignated subsec. (j), relating to current inclusion in case of revolving credit plans, etc., as (k).
Subsec. (l)(1)(A). Pub. L. 100–647, § 2004(d)(1), inserted “of the same type” after “disposes of personal property”.
1987—Subsec. (b)(2)(A). Pub. L. 100–203, § 10202(b)(1), substituted “Dealer dispositions” for “Dealer disposition of personal property” in heading and amended text generally. Prior to amendment, text read as follows: “A disposition of personal property on the installment plan by a person who regularly sells or otherwise disposes of personal property on the installment plan.”
Subsec. (l). Pub. L. 100–203, § 10202(b)(2), added subsec. (l).
1986—Subsec. (f)(1). Pub. L. 99–514, § 642(a)(3), amended par. (1) generally. Prior to amendment, par. (1) read as follows: “Except for purposes of subsections (g) and (h), the term ‘related person’ means a person whose stock would be attributed under section 318(a) (other than paragraph (4) thereof) to the person first disposing of the property.”
Subsec. (f)(8). Pub. L. 99–514, § 642(b)(1), added par. (8).
Subsec. (g). Pub. L. 99–514, § 642(a)(1)(D), substituted “controlled entity” for “80-percent owned entity” in heading.
Subsec. (g)(1). Pub. L. 99–514, § 642(b)(2), amended par. (1) generally. Prior to amendment, par. (1) read as follows: “In the case of an installment sale of depreciable property between related persons within the meaning of section 1239(b), subsection (a) shall not apply, and, for purposes of this title, all payments to be received shall be deemed received in the year of the disposition.”
Subsec. (h). Pub. L. 99–514, § 631(e)(8)(C), substituted “certain liquidations” for “section 337 liquidations” in heading.
Subsec. (h)(1)(A). Pub. L. 99–514, § 631(e)(8)(A), amended subpar. (A) generally. Prior to amendment, subpar. (A) read as follows: “If, in connection with a liquidation to which section 337 applies, in a transaction to which section 331 applies the shareholder receives (in exchange for the shareholder’s stock) an installment obligation acquired in respect of a sale or exchange by the corporation during the 12-month period set forth in section 337(a), then, for purposes of this section, the receipt of payments under such obligation (but not the receipt of such obligation) by the shareholder shall be treated as the receipt of payment for the stock.”
Subsec. (h)(1)(B). Pub. L. 99–514, § 631(e)(8)(A), amended subpar. (B) generally. Prior to amendment, subpar. (B) read as follows: “Subparagraph (A) shall not apply to an installment obligation described in section 337(b)(1)(B) unless such obligation is also described in section 337(b)(2)(B).”
Subsec. (h)(1)(E). Pub. L. 99–514, § 631(e)(8)(B), substituted “subsidiaries” for “subsidiary” in heading and amended text generally. Prior to amendment, subpar. (E) read as follows: “For purposes of subparagraph (A), in any case to which section 337(c)(3) applies, an obligation acquired in respect of a sale or exchange by the selling corporation shall be treated as so acquired by the corporation distributing the obligation to the shareholder.”
Subsec. (i)(2). Pub. L. 99–514, § 1809(c), substituted “section 1245 or 1250 (or so much of section 751 as relates to section 1245 or 1250)” for “section 1245 or 1250”.
Subsec. (j). Pub. L. 99–514, § 812(a), added subsec. (j) relating to current inclusion in case of revolving credit plans, etc.
1984—Subsec. (g). Pub. L. 98–369, § 421(b)(6)(C), struck out “spouse or” after “property to” in heading.
Subsec. (h)(1)(C). Pub. L. 98–369, § 421(b)(6)(B), inserted “married to each other or are”.
Subsec. (i). Pub. L. 98–369, § 112(a), amended subsec. (i) generally, substituting provisions relating to recognition of recapture income in year of disposition for provisions relating to application of subsec. (a) in the case of an installment sale of section 179 property.
1983—Subsec. (f)(6)(C). Pub. L. 97–448 inserted “, when used in any provision of this section other than subsection (b)(1),” after “the term ‘payment’ ”.
1981—Subsecs. (i), (j). Pub. L. 97–34 added subsec. (i) and redesignated former subsec. (i) as (j).
Statutory Notes and Related Subsidiaries
Effective Date of 2004 Amendment
Pub. L. 108–357, title VIII, § 897(b), Oct. 22, 2004, 118 Stat. 1649, provided that:
“The amendment made by this section [amending this section] shall apply to sales occurring on or after the date of the enactment of this Act [Oct. 22, 2004].”
Effective Date of 1988 Amendment
Amendment by sections 1006(e)(7), (i)(1), (2), 1008(g)(1), and 1018(u)(25), (26) of Pub. L. 100–647 effective, except as otherwise provided, as if included in the provision of the Tax Reform Act of 1986, Pub. L. 99–514, to which such amendment relates, see section 1019(a) of Pub. L. 100–647, set out as a note under section 1 of this title.
Amendment by section 2004(d)(1), (5) of Pub. L. 100–647 effective, except as otherwise provided, as if included in the provisions of the Revenue Act of 1987, Pub. L. 100–203, title X, to which such amendment relates, see section 2004(u) of Pub. L. 100–647, set out as a note under section 56 of this title.
Effective Date of 1987 Amendment
Pub. L. 100–203, title X, § 10202(e), Dec. 22, 1987, 101 Stat. 1330–392, as amended by Pub. L. 100–647, title II, § 2004(d)(3), (4), (6), Nov. 10, 1988, 102 Stat. 3599, 3600, provided that:
“(1) In general.—
Except as provided in this subsection, the amendments made by this section [amending this section and sections
56,
381,
453A, and
691 of this title and repealing
section 453C of this title] shall apply to
dispositions in taxable years beginning after
December 31, 1987.
“(2) Special rules for dealers.—
“(B) Special rules for obligations arising from dealer dispositions after february 28, 1986, and before january 1, 1988.—
“(i) In general.—
In the case of an applicable installment obligation arising from a
disposition described in subclause (I) or (II) of section 453C(e)(1)(A)(i) of the
Internal Revenue Code of 1986 (as in effect before the amendments made by this section) before
January 1, 1988, the amendments made by subsections (a) and (b) shall apply to taxable years beginning after
December 31, 1987.
“(ii) Change in method of accounting.—In the case of any taxpayer who is required by clause (i) to change its method of accounting for any taxable year with respect to obligations described in clause (i)—
“(I)
such change shall be treated as initiated by the taxpayer,
“(II)
such change shall be treated as made with the consent of the Secretary of the Treasury or his delegate, and
“(III)
the net amount of adjustments required by section 481 of the
Internal Revenue Code of 1986 shall be taken into account over a period not longer than 4 taxable years.
“(3) Special rule for nondealers.—
“(A) Election.—
A taxpayer may elect, at such time and in such manner as the Secretary of the Treasury or his delegate may prescribe, to have the amendments made by subsections (a) and (c) [amending sections
381,
453A, and
691 of this title and repealing
section 453C of this title] apply to taxable years ending after
December 31, 1986, with respect to
dispositions and pledges occurring after
August 16, 1986.
“(B) Pledging rules.—Except as provided in subparagraph (A)—
“(i) In general.—
Section 453A(d) of the
Internal Revenue Code of 1986 shall apply to any installment obligation which is pledged to secure any secured indebtedness (within the meaning of section 453A(d)(4) of such Code) after
December 17, 1987, in taxable years ending after such date.
“(ii) Coordination with section 453c.—
For purposes of section 453C of such Code (as in effect before its repeal), the face amount of any obligation to which section 453A(d) of such Code applies shall be reduced by the amount treated as payments on such obligation under section 453A(d) of such Code and the amount of any indebtedness secured by it shall not be taken into account.
“(C) Certain dispositions deemed made on 1st day of taxable year.—If the taxpayer makes an election under subparagraph (A), in the case of the taxpayer’s 1st taxable year ending after December 31, 1986—
“(i)
dispositions after
August 16, 1986, and before the 1st day of such taxable year shall be treated as made on such 1st day, and
“(ii)
subsections (b)(2)(B) and (c)(4) of section 453A of such Code shall be applied separately with respect to such
dispositions by substituting for ‘$5,000,000’ the amount which bears the same ratio to $5,000,000 as the number of days after
August 16, 1986, and before such 1st day bears to 365.
Effective Date of 1986 Amendment
Amendment by section 631(e)(8) of Pub. L. 99–514 applicable to any distribution in complete liquidation, and any sale or exchange, made by a corporation after July 31, 1986, unless such corporation is completely liquidated before Jan. 1, 1987, any transaction described in section 338 of this title for which the acquisition date occurs after Dec. 31, 1986, and any distribution, not in complete liquidation, made after Dec. 31, 1986, with exceptions and special and transitional rules, see section 633 of Pub. L. 99–514, set out as an Effective Date note under section 336 of this title.
Amendment by section 642(a)(1)(D), (3), (b) of Pub. L. 99–514 applicable to sales after Oct. 22, 1986, in taxable years ending after such date, but not applicable to sales made after Aug. 14, 1986, which are made pursuant to a binding contract in effect on Aug. 14, 1986, and at all times thereafter, see section 642(c) of Pub. L. 99–514, set out as a note under section 1239 of this title.
Pub. L. 99–514, title VIII, § 812(c), Oct. 22, 1986, 100 Stat. 2372, as amended by Pub. L. 100–647, title I, § 1008(g)(3)–(6), Nov. 10, 1988, 102 Stat. 3443, provided that:
“(1) In general.—
Except as provided in paragraphs (2) and (3), the amendment made by subsection (a) [amending this section] shall apply to taxable years beginning after December 31, 1986.
“(2) Sales of stock, etc.—
Section 453(k)(2) of the
Internal Revenue Code of 1986, as added by subsection (a), shall apply to sales after
December 31, 1986, in taxable years ending after such date.
“(3) Change in method of accounting.—In the case of any taxpayer who made sales under a revolving credit plan and was on the installment method under section 453 or 453A of the Internal Revenue Code of 1986 for such taxpayer’s last taxable year beginning before January 1, 1987, the amendments made by this section [amending this section and section 453A of this title] shall be treated as a change in method of accounting for its 1st taxable year beginning after December 31, 1986, and—
“(A)
such change shall be treated as initiated by the taxpayer,
“(B)
such change shall be treated as having been made with the consent of the Secretary,
“(C)
the period for taking into account adjustments under section 481 of such Code by reason of such change shall be equal to 4 years, and
“(D)
except as provided in paragraph (4), the amount taken into account in each of such 4 years shall be the applicable percentage (determined in accordance with the following table) of the net adjustment:
1st taxable year
|
15
|
2nd taxable year
|
25
|
3rd taxable year
|
30
|
4th taxable year
|
30.
|
If the taxpayer’s last taxable year beginning before January 1, 1987, was the taxpayer’s 1st taxable year in which sales were made under a revolving credit plan, all adjustments under section 481 of such Code shall be taken into account in the taxpayer’s 1st taxable year beginning after December 31, 1986.
“(4) Acceleration of adjustments where contraction in amount of installment obligations.—
“(A) In general.—If the percentage determined under subparagraph (B) for any taxable year in the adjustment period exceeds the percentage which would otherwise apply under paragraph (3)(D) for such taxable year (determined after the application of this paragraph for prior taxable years in the adjustment period)—
“(i)
the percentage determined under subparagraph (B) shall be substituted for the applicable percentage which would otherwise apply under paragraph (3)(D), and
“(ii)
any increase in the applicable percentage by reason of clause (i) shall be applied to reduce the applicable percentage determined under paragraph (3)(D) for subsequent taxable years in the adjustment period (beginning with the 1st of such subsequent taxable years).
“(B) Determination of percentage.—For purposes of subparagraph (A), the percentage determined under this subparagraph for any taxable year in the adjustment period is the excess (if any) of—
“(i)
the percentage determined by dividing the aggregate contraction in revolving installment obligations by the aggregate face amount of such obligations outstanding as of the close of the taxpayer’s last taxable year beginning before January 1, 1987, over
“(ii)
the sum of the applicable percentages under paragraph (3)(D) (as modified by this paragraph) for prior taxable years in the adjustment period.
“(C) Aggregate contraction in revolving installment obligations.—For purposes of subparagraph (B), the aggregate contraction in revolving installment obligations is the amount by which—
“(i)
the aggregate face amount of the revolving installment obligations outstanding as of the close of the taxpayer’s last taxable year beginning before January 1, 1987, exceeds
“(ii)
the aggregate face amount of the revolving installment obligations outstanding as of the close of the taxable year involved.
“(D) Revolving installment obligations.—
For purposes of this paragraph, the term ‘revolving installment obligations’ means installment obligations arising under a revolving credit plan.
“(E) Treatment of certain obligations disposed of on or before october 26, 1987.—For purposes of subparagraphs (B)(i) and (C)(i), in determining the aggregate face amount of revolving installment obligations outstanding as of the close of the taxpayer’s last taxable year beginning before January 1, 1987, there shall not be taken into account any obligation—
“(i)
which was disposed of to an unrelated person on or before October 26, 1987, or
“(ii)
was disposed of to an unrelated person on or after such date pursuant to a binding written contract in effect on
October 26, 1987, and at all times thereafter before such
disposition.
“(5) Limitation on losses from sales of obligations under revolving credit plans.—If 1 or more obligations arising under a revolving credit plan and taken into account under paragraph (3) are disposed of during the adjustment period, then, notwithstanding any other provision of law—
“(A)
no losses from such
dispositions shall be recognized, and
“(B)
the aggregate amount of the adjustment for taxable years in the adjustment period (in reverse order of time) shall be reduced by the amount of such losses.
“(6) Adjustment period.—
For purposes of paragraphs (4) and (5), the adjustment period is the 4-year period under paragraph (3).”
Amendment by section 1809(c) of Pub. L. 99–514 effective, except as otherwise provided, as if included in the provisions of the Tax Reform Act of 1984, Pub. L. 98–369, div. A, to which such amendment relates, see section 1881 of Pub. L. 99–514, set out as a note under section 48 of this title.
Effective Date of 1984 Amendment
Pub. L. 98–369, div. A, title I, § 112(b), July 18, 1984, 98 Stat. 635, provided that:
“(1) In general.—
Except as otherwise provided in this subsection, the amendments made by this section [amending this section] shall apply with respect to
dispositions made after
June 6, 1984.
“(2) Exception.—
The amendments made by this section shall not apply with respect to any
disposition conducted pursuant to a contract which was binding on
March 22, 1984, and at all times thereafter.
“(3) Special rule for certain dispositions before october 1, 1984.—
The amendments made by this section shall not apply to any
disposition before
October 1, 1984, of all or substantially all of the personal property of a cable television business pursuant to a written offer delivered by the seller on
June 20, 1984, but only if the last payment under the installment contract is due no later than
October 1, 1989.”
Amendment by section 421(b)(6)(B), (C) of Pub. L. 98–369 applicable to transfers after July 18, 1984, in taxable years ending after such date, subject to election to have amendment apply to transfers after 1983 or to transfers pursuant to existing decrees, see section 421(d) of Pub. L. 98–369, set out as an Effective Date note under section 1041 of this title.
Effective Date of 1983 Amendment
Pub. L. 97–448, title III, § 311(a), Jan. 12, 1983, 96 Stat. 2411, provided that:
“The amendments made by sections 301, 302, and 303 [amending this section and sections
453B and
1239 of this title] shall apply to
dispositions made after
October 19, 1980, in taxable years ending after such date.”
Effective Date; Application of Former Section 453(b) to Certain Dispositions
Pub. L. 96–471, § 6(a), Oct. 19, 1980, 94 Stat. 2256, as amended by Pub. L. 99–514, § 2, Oct. 22, 1986, 100 Stat. 2095, provided:
“(1) In general.—
Except as otherwise provided in this subsection, the amendments made by sections 2 [enacting this section and sections
453A and
453B of this title and amending sections 311, 336, 337, 381, former section 453, and sections
453B,
481,
644,
691, and
1255 of this title] and 5 [amending
section 1239 of this title] shall apply to
dispositions made after the date of the enactment of this Act [
Oct. 19, 1980] in taxable years ending after such date.
“(3) For section 453(h).—
Paragraphs (1) and (2) of section 453(h) of such Code (as amended by section 2) shall apply in the case of distributions of installment obligations after March 31, 1980.
“(4) For section 453a.—
Section 453A of the
Internal Revenue Code of 1986 (as amended by section 2) shall apply to taxable years ending after the date of enactment of this Act [
Oct. 19, 1980].
“(5) For section 453b(f).—
Section 453B(f) of the
Internal Revenue Code of 1986 (as amended by section 2) shall apply to installment obligations becoming unenforceable after the date of the enactment of this Act [
Oct. 19, 1980].
“(7) Special rule for application of former section 453 to certain dispositions.—In the case of any disposition made on or before the date of the enactment of this Act [Oct. 19, 1980] in any taxable year ending after such date, the provisions of section 453(b) of the Internal Revenue Code of 1986 [see subsec. (b) of former section 453 of this title, set out below] as in effect before such date, shall be applied with respect to such disposition without regard to—
“(A)
paragraph (2) of such section 453(b), and
“(B)
any requirement that more than 1 payment be received.”
Plan Amendments Not Required Until January 1, 1989
For provisions directing that if any amendments made by subtitle A or subtitle C of title XI [§§ 1101–1147 and 1171–1177] or title XVIII [§§ 1800–1899A] of Pub. L. 99–514 require an amendment to any plan, such plan amendment shall not be required to be made before the first plan year beginning on or after Jan. 1, 1989, see section 1140 of Pub. L. 99–514, as amended, set out as a note under section 401 of this title.