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Publication 537 Contents Cat. No. 15067V Introduction ............................................... 1 Department What is an Installment Sale?................... 2 of the Treasury Installment General Rules ............................................ 2 Figuring Installment Income................ 2 Internal Revenue Sales Other Rules ................................................ 3 Service Electing Out.......................................... 3 Payments.............................................. 4 Escrow Accounts ................................. 5 For use in preparing Depreciation Recapture Income......... 6 Sales to Related Persons.................... 6 1995 Returns Like-Ki nd Excha nges................ ........... 7 Conting ent Sales ................................. 7 Single Sale of Several Assets............. 7 Sale of a Busin ess ................. ......... ..... 7 Unstated Interest ................................. 9 Dispositions of Installment Obliga tions ......... ........................... 10 Reposse ssions .................................... 11 Repossessing Your Former Home ............................................. 13 Reporting an Installment Sale ................ 14 Examples .............................................. 14 Important Changes for 1995 Caution. As this publication was being pre- pared for print, Congress was considering tax law changes that could affect your 1995 tax return and 1996 estimated taxes. These changes include: Capital gains and losses, and Sale of your home. See Publication 553, Highlights of 1995 Tax Changes, for further developments. Informa- tion on these changes will also be availabl e electronically through our bulletin board or via the Internet (see page 34 of the Form 1040 Instructions). Introduction This publication discusses the general rules that apply to all installment sales. It also dis- cusses the more complex rules that apply only when certain conditions exist or certain types of property are sold. If you sold your home or other nonbusiness property, under an installment plan, you will need only the general rules. If you sold busi- ness or rental property for which you claimed depreciation deductions, see Depreciation Recapture Income under Other Rules. If you sell your entire interest in a passive activity on the installment method, special rules apply to the treatment of passive activity losses. For more information, see Publication 925.

US Internal Revenue Service: p537--1995

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