Which of the following is (are)a taxable disposition of an installment obligation?
A) (1) only.
B) (1) and (2).
C) (2) and (3).
D) (1) and (3).
E) None of the above.

Question

Which of the following is (are)a taxable disposition of an installment obligation? 
A) (1) only. 
B) (1) and (2). 
C) (2) and (3). 
D) (1) and (3). 
E) None of the above.

Quizplus · Accepted Answer

(1) and (3) are taxable dispositions of an installment obligation.

(1) - Disposition of the installment obligation by sale, exchange or liquidation.

(3) - If the buyer of the property ceases to make payments on the installment obligation, it is considered a deemed disposition and the seller must include the remaining balance as income in the year of default.

(2) - A reduction in the buyer's installment obligation due to damage or destruction of the property is not a taxable disposition.

Which of the Following Is (Are)a Taxable Disposition of an Installment