Installment Sale

[Kram BergGold]

If a dealer sells a piece of furniture and gets all the proceeds in 2013 from the buyer but pays the owner 50% in 2013 and 50% in 2014 can this be treated as an installment sale?

[Maribeth]

If a dealer sells a piece of furniture and gets all the proceeds in 2013 from the buyer but pays the owner 50% in 2013 and 50% in 2014 can this be treated as an installment sale?

I see two issues with it. First of all, you indicate that the person is a "dealer". Dealers cannot have installment sales. All the proceeds were received in one year. No installment sale.

Perhaps the person who sold the furniture to the dealer could have an installment sale but I don't believe that is what you question is asking.

Maribeth

[David1980]

Perhaps the person who sold the furniture to the dealer could have an installment sale but I don't believe that is what you question is asking.

That question would make more sense though.

Say I sell something valuable through dealer consignment and tell them to only pay me 50% in December and the rest in January. My motive is I want to spread the taxable gain out over two years. The dealer receives all the cash in December from the buyer. Can I do it?

[Maribeth]

That question would make more sense though.

Say I sell something valuable through dealer consignment and tell them to only pay me 50% in December and the rest in January. My motive is I want to spread the taxable gain out over two years. The dealer receives all the cash in December from the buyer. Can I do it?

Here the question is a little different. You are not dealing with a sale, you are dealing with a consignment. Your agent has taken the merchandie from you and has sold it on your behalf. Your agent will take a fee and then send the balance to you. If you have an agreement with your agent to be paid in two installments, over two separate years, then, yes, you would have an installment sale.

This is different than the OP as in that post the original owner of the furniture had already sold the furniture to the merchant, not consigned the furniture to an agent.

Maribeth

[New York Enrolled Agent]

If a dealer sells a piece of furniture and gets all the proceeds in 2013 from the buyer but pays the owner 50% in 2013 and 50% in 2014 can this be treated as an installment sale?

Kram

Your post needs some clarification. The way I understand it, is that the taxpayer (the owner) gave a piece of furniture to a dealer (an agent of the owner) and the dealer then sold it to a willing buyer who paid in full.

If my understanding is correct, then I believe the taxpayer would recognize the full amount of income in 2013 based on constructive receipt.

From TCM 2006-239: Generally, receipt of payment by an agent is constructive receipt by the principal. Md. Cas. Co. v. United States, 251 U.S. 342, 346-347 (1920); Joyce v. Commissioner, 42 T.C. 628, 639 (1964); see also Burkes v. Commissioner, T.C. Memo. 1998-61.

[Kram BergGold]

Clarification

When my client gives the furniture to the dealer the buyer will already have been found. It is not like my client gave the furniture to a dealer who held it in his store and then at a future date sold it. Based on the responses, this would not be an installment sale but constructive receipt. What if the deal was signed on Dec 31 but the cash did not transfer from buyer to dealer till Jan 1. Many years ago when a stock sale trade dates was in year 1 but the settlement date was in year 2 this could be treated as an installment sale, this has since been outlawed. Maybe that would work?