55837

[#1]

The following diagnostic is generating: This return has a deferred tax on the gain from an installment sale with sale price exceeding $150,000, and the total of all installment sale obligations that arose during the tax year and were outstanding at the end of the year exceeded $5 million. Interest on the deferred tax on the gain must be reported per section 453(a)(1). I am just trying to understand the proper application of this diagnostic and rule. I see where to enter the number, IF I need to enter a number. Still researching, but if anyone want to enlighten me would be great.

[sjrcpa]

It's 453A. It probably applies.

You have to compute interest on the deferred tax liability and treat it as an additional tax on the 2022 tax return.

From RIA Checkpoint Catalyst:

For any tax year, the “deferred tax liability” for an installment obligation means (1) the amount of still-unrecognized gain on that obligation as of the end of the tax year, multiplied by (2) the maximum income tax rate in effect for that tax year under IRC § 1 or  IRC §11 (whichever is appropriate).However, for recognized gain that will be treated as long-term capital gain, the maximum capital gains rate under IRC §1(h)  is used.

You use the Q4 2022 underpayment rate for the interest rate (assuming a calendar year taxpayer.)

[YOLOTaxes]

Thank you for the response. 

This code section is nasty, yuck. I did find the FARMERS exemption though as I read through all of the section!! WHEW!! This was a farm land sale. 

[sjrcpa]

It's not too hard to do the calculation. Glad you found an out, though.