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.

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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.

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