As it is consistent with the wherewithal to pay concept, the tax law requires a seller to recognize gain in the years the proceeds from the installment sale are collected.

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The wherewithal to pay concept requires that a taxpayer recognize gain when they receive payment or the right to receive payment. In an installment sale, the seller receives payment over time, but must recognize gain in the years that they receive the proceeds from the sale.

As It Is Consistent with the Wherewithal to Pay Concept