Installment Sales Revision Act of 1980

(Measure passed Senate, amended)

Installment Sales Revision Act of 1980 - Amends the Internal Revenue Code to revise the rules for reporting gain on the sale of real and personal property under the installment sales method.

Eliminates the requirement that the seller, under an installment sales agreement, receive no more than 30 percent of the selling price in the taxable year of the sale. Eliminates the $1,000 minimum sales price requirement with respect to the casual sale of personal property under an installment sales agreement.

Defines "installment sale" as a disposition of property in which at least one payment is made after the taxable year in which the disposition occurs (presently, Internal Revenue Service regulations require two or more subsequent payments). Excludes from installment sales treatment dispositions of personal property by individuals who regularly deal in such property and dispositions of inventories of personal property.

Provides that all sales of real and personal property which qualify under the terms of this Act as installment sales shall be automatically treated as such, unless the taxpayer elects out of such treatment.

Accelerates the recognition of gain from the installment sale of property (other than marketable securities) by a taxpayer to a related individual (spouse, children, grandchildren, and parents, but not brothers and sisters) if the related individual disposes of the property to a third party before the taxpayer receives all payments with respect to such disposition. Specifies that such acceleration shall occur only if the date of the disposition to the third party is not more than two years after the date of the original disposition. Limits the amount of gain which the taxpayer must recognize from the disposition of the property by a related individual to a third party to the excess of the amount realized by the second sale over the actual payments made under the original installment sale.

Prohibits installment sales treatment for transactions between a taxpayer and a taxpayer's spouse and a controlled corporation or partnership, or between two controlled entities, unless it is shown that tax avoidance was not one of the principal purposes of the sale.

Exempts from the operation of the related party disposition rule the following transactions: (1) reacquisitions of stock by issuing corporations; (2) involuntary conversions if the original installment sale occurred before the threat of condemnation; (3) dispositions after the death of the taxpayer or the related party; and (4) dispositions which do not evidence tax avoidance as a principal purpose.

Excludes the receipt of like-kind property in determining gain recognized for installment sale reporting purposes (reverses the Internal Revenue Service regulation which holds the receipt of like-kind property results in the recognition of installment gain even though the taxpayer receives no cash in the transaction).

Provides for the nonrecognition of gain from the receipt by a shareholder of installment obligations as liquidating obligations from a corporation which adopts a 12-month plan of liquidation as provided for under specified provisions of the Internal Revenue Code.

Directs the Secretary of the Treasury to issue regulations for permitting the installment sales reporting in cases where the sales price is contingent (presently, installment sales treatment is not allowed if the sales price is contingent).

Treats the cancellation of an installment obligation as a disposition of such obligation, thus requiring the immediate recognition of gain realized from the installment sale. Requires the market value of a cancelled obligation to be stated at not less than its face amount if the obligor and obligee are related individuals.

Treats as a reacquisition by the seller, with no recognition of gain or loss, the acquisition of real property by a taxpayer holding an installment obligation acquired from a decedent, which is indebtedness to such seller. Increases the basis of real property so acquired by the amount of the estate tax deduction allowed for income received in respect of a decedent which would otherwise have been allowable to the taxpayer with respect to the gains on the exchange of the obligation for the real property.