If an installment sale agreement involving a $15,000 note calls for no interest, interest must be imputed both to the buyer as interest expense and to the seller as interest income.

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According to the IRS, if a seller does not charge interest on an installment sale agreement, they must still impute interest and report it as income on their tax return. The buyer may also be required to impute interest and report it as a deduction on their tax return.

If an Installment Sale Agreement Involving a $15,000 Note Calls