Installment sale

[TAX4US]

TP age 77 sold rental property to son at FMV financing 90% to provide income to him and spouse next couple years. It seems pub 537 indicates I can't report on installment sale because it is depreciable property in the new owners hands. It was not set up that way to avoid tax just to provide future income. I think I do not have a choice in this one except to report in full. What do you think? Report as full sale or not? Thanks

[Anarchrist]

What about the exception that it wasn't to avoid tax?

[Maude Lebowski]

You might be OK doing an installment sale. Pub 537 says "certain related persons" and later on defines them. Father & son are not "related persons" in this particular case. At least that's the way I read the pub.

[TAXNJ]

What about the exception that it wasn't to avoid tax?

As you may know, general tax avoidance is not illegal but tax evasion is.

“”Anyone may arrange his affairs so that his taxes shall be as low as possible; he is not bound to choose that pattern which best pays the treasury. There is not even a patriotic duty to increase one's taxes.
Over and over again the Courts have said that there is nothing sinister in so arranging affairs as to keep taxes as low as possible. Everyone does it, rich and poor alike and all do right, for nobody owes any public duty to pay more than the law demands."

-Judge Learned Hand, Helvering v. Gregory, 69 F.2d 809, 810 (2d Cir. 1934), aff'd, 293 U.S. 465 (1935)