Installment method of accounting denied, sales of property to customers

Installment method of accounting denied for sales

The U.S. Tax Court today issued a memorandum opinion, concluding that property acquired by limited liability companies (LLCs) at tax lien public auctions in Illinois, and then sold to third parties under contracts for deed, was real property held primarily for sale to customers in the ordinary course of a trade or business. Accordingly, the LLCs were not allowed to report sales of these properties under the installment method.

Related content

The case is: SI Boo, LLC v. Commissioner, T.C. Memo 2015-19 (February 4, 2015)

Read the Tax Court’s memorandum opinion [PDF 135 KB]


The Tax Court found that because the subject real estate, acquired by tax deed, was property held by primarily for sale to customers in the ordinary course of the trade or business, this precluded the LLCs from characterizing the properties as capital assets.

Because these real estate properties were disposed of by the entities while held by them for sale to customers in the ordinary course of their trades or businesses, the entities could not use the installment sales method of accounting under section 453.

© 2016 KPMG LLP, a Delaware limited liability partnership and the U.S. member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (“KPMG International”), a Swiss entity. All rights reserved.

The KPMG logo and name are trademarks of KPMG International. KPMG International is a Swiss cooperative that serves as a coordinating entity for a network of independent member firms. KPMG International provides no audit or other client services. Such services are provided solely by member firms in their respective geographic areas. KPMG International and its member firms are legally distinct and separate entities. They are not and nothing contained herein shall be construed to place these entities in the relationship of parents, subsidiaries, agents, partners, or joint venturers. No member firm has any authority (actual, apparent, implied or otherwise) to obligate or bind KPMG International or any member firm in any manner whatsoever. The information contained in herein is of a general nature and is not intended to address the circumstances of any particular individual or entity. Although we endeavor to provide accurate and timely information, there can be no guarantee that such information is accurate as of the date it is received or that it will continue to be accurate in the future. No one should act on such information without appropriate professional advice after a thorough examination of the particular situation. For more information, contact KPMG's Federal Tax Legislative and Regulatory Services Group at: + 1 202 533 4366, 1801 K Street NW, Washington, DC 20006.

Connect with us


Request for proposal



KPMG's new digital platform

KPMG's new digital platform