Because the method of accounting for a transaction is usually irrevocable, once a taxpayer makes a method election, that method will likely govern regardless of the eventual outcome of the contingent consideration.
I have not filed the return for 2021 yet. From the responses, I will adjust the sales price and file the return for 2021.
Here, the gross selling price is the total $488,000 purchase price agreed to between the parties as it appeared on the contract of sale. The subsequent renegotiation between the parties and the reduction in this price occurred in 1986, which was 2 years following the year of sale and subsequent to the years in issue. Petitioners cannot retroactively seek a recalculation of their selling price and the gross profit based on events which occurred following the year of sale. See Cox v. Commissioner [Dec. 32,601], 62 T.C. 247, 255 (1974). The selling price on this installment sale remains at respondent's figure of $488,000.
A taxpayer on an accrual basis is not required to include in the "amount realized" (as property other than money) the value of the right to receive property in a future year where there is a substantial contingency as to the amount ultimately to be received.
Users browsing this forum: chicagocpa, DAJCPA, Gjkycpa, Google [Bot], JR1, lckent, Nilodop, Seaside CPA, sjrcpa, Slava G, SumwunLost, TAXMASTER, UnlicensedTaxPro and 126 guests