taxdan Posted February 20, 2011 Report Share Posted February 20, 2011 I have a client on the selling end of an installment sale with no stated interest. She sold her goodwill in a partnership for $75,000 (no basis) paid quarterly over 3 years beginning in 2010. Can I simply use a rate (like 1% APR) and do the math to figure how much interest would be paid (calculated quarterly) over the life of the agreement, then deduct that total interest from the contract price? I calculated $1,219 in interest over the 3 years, then was planning on showing $656 interest received in year one, $406 interest received in year 2, and $157 in year 3...and the contract selling price would be $73,781. Does that sound like I'm even remotely doing this right? I'm new to installment agreements and any advice would be greatly appreciated. Thanks! Dan Quote Link to comment Share on other sites More sharing options...
taxdan Posted February 23, 2011 Author Report Share Posted February 23, 2011 Any thoughts from anyone? Quote Link to comment Share on other sites More sharing options...
jainen Posted February 23, 2011 Report Share Posted February 23, 2011 >> 1% APR << The Applicable Federal Rates are published monthly at My link. Quote Link to comment Share on other sites More sharing options...
taxdan Posted February 23, 2011 Author Report Share Posted February 23, 2011 Thanks Jainen. Does it look like I'm handling the rest of it correctly? Quote Link to comment Share on other sites More sharing options...
TAXMAN Posted February 23, 2011 Report Share Posted February 23, 2011 So looking at the question what would the imputed interest rate be? I sometimes get confused on these. I also have one comming up where the tp and seller aggreed to 2.7% on an installment note for purchase of house. Thanks Quote Link to comment Share on other sites More sharing options...
taxdan Posted February 24, 2011 Author Report Share Posted February 24, 2011 So looking at the question what would the imputed interest rate be? I sometimes get confused on these. I also have one comming up where the tp and seller aggreed to 2.7% on an installment note for purchase of house. Thanks According to Jainen's link, it looks as though the rates depend on the type of asset being sold. According to Pub 537 (Installment Sales), it looks as though my client's asset in question is not a section 1274 property, so I am going to use table 2. It does seem a little confusing though determining which IRS section your property falls into though. Quote Link to comment Share on other sites More sharing options...
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