Installment Sale with Section 121 Exclusion Followed by Repossession

Date
2014-07-25
Authors
Harl, Neil
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Iowa State University Digital Repository
Abstract

A 2014 Tax Court case, DeBough v. Commissioner,1 has clarified the handling of an installment sale transaction involving the sale of a principal residence where the buyer defaulted with the property repossessed by the original seller.2 The decision places a premium on acting promptly to resell after repossession if the Section 121 exclusion has been applied in the original transaction.3 The income tax consequences of the repossession can be significant if resale is delayed for more than a year.4

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