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How Am I Taxed in an Installment Sale?

Installment sales are used to help spread out capital gains on a property for a period of more than one year. This is done by taking several, smaller payments for the sale of property instead of one large sum of money. A seller may also carry back a note, allowing the tax payments to be deferred.  When a seller takes the option of a wrap around loan, or an all-inclusive trust deed, monthly payments are made from the buyer and the seller is only taxed on the gain earned in one year’s time, which will be spread out over the term of the trust deed.

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