[Federal Register Volume 59, Number 55 (Tuesday, March 22, 1994)]
[Unknown Section]
[Page 0]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: X94-10322]


[[Page Unknown]]

[Federal Register: March 22, 1994]



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DEPARTMENT OF THE TREASURY
Internal Revenue Service

26 CFR Part 1

 

Installment Method Reporting by Dealers in Personal Property; 
Change from Accrual to Installment Method Reporting

CFR Correction

    In title 26 of the Code of Federal Regulations, part 1 (Secs. 1.401 
to 1.500), revised as of April 1, 1993, section 1.453A-3 and its 
authority citation were inadvertently omitted. The missing text is set 
forth below.

    1. The authority for part 1 is amended by adding the following 
citation:

    Authority: 26 U.S.C. 7805. * * * Section 1.453A-3 also issued 
under 26 U.S.C. 453A.

    2. Section 1.453A-3 is added to read as follows:
Sec. 1.453A-3  Requirements for adoption of or change to installment 
method by dealers in personal property.
    (a) In general. A dealer (within the meaning of Sec. 1.453A-
1(c)(1)) may adopt or change to the installment method for a type or 
types of sales on the installment plan (within the meaning of 
Sec. 1.453A-1(c)(3) and (d)) in the manner prescribed in this section. 
This section applies only to dealers and only with respect to their 
sales on the installment plan.
    (b) Time and manner of electing installment method reporting--(1) 
Time for election. An election to adopt or change to the installment 
method for a type or types of sales must be made on an income tax 
return for the taxable year of the election, filed on or before the 
time specified (including extensions thereof) for filing such return.
    (2) Adoption of installment method. A taxpayer who adopts the 
installment method for the first taxable year in which sales are made 
on an installment plan of any kind must indicate in the income tax 
return for that taxable year that the installment method of accounting 
is being adopted and specify the type or types of sales included within 
the election. If a taxpayer in the year of the initial election made 
only one type of sale on the installment plan, but during a subsequent 
taxable year makes another type of sale on the installment plan and 
adopts the installment method for that other type of sale, the taxpayer 
must indicate in the income tax return for the subsequent year that an 
election is being made to adopt the installment method of accounting 
for the additional type of sale.
    (3) Change to installment method. A taxpayer who changes to the 
installment method for a particular type or types of sales on the 
installment plan in acordance with this section must, for each type of 
sale on the installment plan for which the installment method is to be 
used, attach a separate statement to the income tax return for the 
taxable year with respect to which the change is made. Each statement 
must show the method of accounting used in computing taxable income 
before the change and the type of sale on the installment plan for 
which the installment method is being elected.
    (4) Deemed elections. A dealer (including a person who is a dealer 
as a result of the recharacterization of transactions as sales) is 
deemed to have elected the installment method if the dealer treats a 
sale on the installment plan as a transaction other than a sale and 
fails to report the full amount of gain in the year of the sale. For 
example, if a transaction treated by a dealer as a lease is 
recharacterized by the Internal Revenue Service as a sale on the 
installment plan, the dealer will be deemed to have elected the 
installment method assuming the dealer failed to report the full amount 
of gain in the year of the transaction.
    (c) Consent. A dealer may adopt or change to the installment method 
for sales on the installment plan without the consent of the 
Commissioner. However, a dealer may not change from the installment 
method to the accrual method of accounting or to any other method of 
accounting without the consent of the Commissioner.
    (d) Cut-off method for amounts previously accrued. An election to 
change to the installment method for a type of sale applies only with 
respect to sales made on or after the first day of the taxable year of 
change. Thus, payments received in the taxable year of the change, or 
in subsequent years, in respect of an installment obligation which 
arose in a taxable year prior to the taxable year of change are not 
taken into account on the installment method, but rather must be 
accounted for under the taxpayer's method of accounting in use in the 
prior year.
    (e) Effective date. This section applies to sales by dealers in 
taxable years ending after October 19, 1980, but generally does not 
apply to sales made after December 31, 1987. For sales made after 
December 31, 1987, sales by a dealer in personal or real property shall 
not be treated as sales on the installment plan. (However, see section 
453(l)(2) for certain exceptions to this rule.) For rules relating to 
sales by dealers in taxable years ending before October 20, 1980, see 
26 CFR 1.453-7 and 1.453-8 (rev. as of April 1, 1987).

BILLING CODE 1505-01-D