Real Estate "Dealers", Installment Sales, Deferred Taxes, and the IRS

[Mack Fleming]

The IRS does not allow real property Dealers to use the Installment Plan method of accounting. This means that if the Dealer does an Owner Financed sell, he/she is responsible for the tax liability for the entire paper profit, all due in the tax year of sale. This is not fair.

One of the only exceptions I have found is: (1) The Dealer is engaged in selling unimproved residential lots. (2) He/she must pay a special tax on the deferred tax liability. Again, the Dealer is responsible for the tax liability for entire paper profit. The only difference here is if it is not paid to the IRS in the tax year of sale, then interest must be paid to the IRS on the amount of the tax liability. This is not fair.

Assuming I am correct in my understanding, I would like to know what others think of this.

Thank you,
Mack