Introduction

An installment sale is a sale of property where you receive at least one payment after the tax year of the sale. If you realize a gain on an installment sale, you may be able to report part of your gain when you receive each payment. This method of reporting gain is called the installment method. You can’t use the installment method to report a loss. You can choose to report all of your gain in the year of sale.

Installment obligation. The buyer’s obligation to make future payments to you can be in the form of a deed of trust, note, land contract, mortgage, or other evidence of the buyer’s debt to you.

Topics This chapter discusses:

• The general rules that apply to using the installment method, and

• Installment sale of a farm.

Useful Items You may want to see:

Publication

To revoke the election, you must obtain a private letter ruling from the IRS. The procedures and user fees for obtaining a private letter ruling are published annually in the first revenue procedure issued each calendar year. For 2025, go to IRS.gov/irb/2025-01_IRB#RP-2025-1 .

Send your request for a private letter ruling, including the applicable user fee, to the IRS following the instructions in section 7 of Revenue Procedure 2025-1. A schedule of the current user fees is available in Appendix A of Revenue Procedure 2025-1, starting on page 84.

When to elect out. Make this election by the due date, including extensions, for filing your tax return for the year the sale takes place.

However, if you timely file your tax return for the year the sale takes place without making the election, you can still make the election by filing an amended return within 6 months of the due date of the return (excluding extensions). Enter “Filed pursuant to section 301.9100-2” at the top of the amended return. File the amended return at the same address you filed the original return. If you electronically filed your Form 1040 or 1040-SR, you may electronically file the Form 1040-X.

Revoking the election. Once made, the election can be revoked only with IRS approval. An approved revocation is retroactive.

The taxpayer can’t revoke the election if either of the following applies.

• One of the purposes is to avoid federal income tax.

• The tax year in which any payment was received has closed.

523

537

538

544

551

523 Selling Your Home

537 Installment Sales

538 Accounting Periods and Methods

544 Sales and Other Dispositions of Assets

551 Basis of Assets

Form (and Instructions)

4797

6252

4797 Sales of Business Property

6252 Installment Sale Income

8594 8594 Asset Acquisition Statement Under

Section 1060

8949 8949 Sales and Other Dispositions of

Capital Assets

See How To Get Tax Help for information about getting publications and forms.