[Code of Federal Regulations]
[Title 26, Volume 6]
[Revised as of April 1, 2004]
From the U.S. Government Printing Office via GPO Access
[CITE: 26CFR1.453A-3]

[Page 147-148]
 
                       TITLE 26--INTERNAL REVENUE
 
    CHAPTER I--INTERNAL REVENUE SERVICE, DEPARTMENT OF THE TREASURY 
                               (CONTINUED)
 
PART 1_INCOME TAXES--Table of Contents
 
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

[[Page 148]]

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).

[T.D. 8269, 54 FR 46375, Nov. 3, 1989]