Installment Sale - Tax Treatment

[ETax847]

Client's uncle passed away recently.  Client sold uncle's business via an installment sale to be paid out over 5 years.  Does the client inherit his uncle's basis or does he get a step up in basis?  I'm wondering what the tax treatment of these installment payments received by the client are.

[Max W]

Heirs inheriting the contract have to continue to pay income taxes on the principal and interest payments as they receive them. Once property is sold under an installment contract, that property is not eligible for a step-up in basis at the date of death.

[Lee B]

4 hours ago, ETax847 said:

Client's uncle passed away recently.  Client sold uncle's business via an installment sale to be paid out over 5 years.  

You don't say what kind of entity was involved, but  if your client sold his uncle's business after the uncle passed away the assets of the business would get a step up in basis.

[Gail in Virginia]

I agree with both answers.  If the client inherited an installment agreement, no step up in basis.  If client inherited a business, they get the step up in basis before the installment agreement goes into effect.