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) The sale or exchange of the installment obligation is a taxable disposition. 
(3) A disposition of the installment obligation by gift or bequest is taxable. However, if the donee or beneficiary continues to receive payments, he or she is treated as acquiring the obligation at its adjusted basis rather than its fair market value, so this option is only partially taxable. 
(2) Death of the obligor is not a taxable disposition of the installment obligation.

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