Important Change

Accrual basis taxpayers. For sales occurring after December 16, 1999, accrual basis taxpayers were required to report installment sales under the accrual method of accounting. The Installment Tax Correction Act of December 28, 2000, repealed that requirement.

If you entered into an installment sale after December 16, 1999, and filed an income tax return by April 16, 2001, reporting the sale on an accrual method, you have IRS approval to revoke your effective election out of the installment method. (See Electing Out of the Installment Method).

To revoke the election, you must file an amended return for the year of the installment sale (and any other year affected by the sale), reporting the gain on the installment method. (See Figuring Installment Income and Reporting Installment Income). You generally have three years from the due date of the original return to file an amended return.

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