Easy Tax Question (Accounting)

Why does the installment sale make sense for a cash basis taxpayer ? What about an accrual based taxpayer ? Why do you think section (of the Federal Tax Code ) 453 does not apply to dealers

Cash basis accounting accounts money transactions only . This means that transactions are recorded if and only if money is received . Installment sale means that properties are disposed or sold in a manner that payments are proportioned and the first payment should be received before the end of the taxable year when the property is disposed . In this case

, if a person uses a cash basis accounting in his or her business , the gain will be that he or she will pay less tax in that accounting period because in cash basis only part of the installment sale will be recorded and only a part of the payment is received (Fishman , 2006 . In accrual basis accounting , transactions are recorded whenever revenue is incurred . This means that an installment sale will be recorded on its full price on that accounting period . If the full price is recorded , then that means full tax on that particular sale will be deducted . However , there will be no records of sale will be accounted for the future accounting periods . This means that no tax will be withheld from that sale on the future accounting period (Walther , 2009

According to the Federal tax code section 453 also known as Installment Method , installment sale occurs when a disposition of property takes place and the...