Taxing the Sale of Property

The federal income tax laws have always included gain from "dealings in property" as an item of gross income, and probably only the payment of wages rivals the sale of property in fundamental importance to taxpayers generally. Nevertheless, the courts and the Internal Revenue Service have yet to develop a consistent and rational approach to taxing the many sales transactions in which the seller takes some evidence of the purchaser's indebtedness in full or partial exchange for the underlying property. This article argues that the accounting provisions under sections 446 and 451, the installment sale provisions under section 453, and the disposition-of-property provisions under section 1001 are all amenable to one consistent interpretation. The approach is simple, requiring only a distinction between sales of property in the regular course of business and isolated or casual sales. This interpretation comports with the apparent congressional intent, gives meaningful effect to each of the relevant statutory provisions, and permits sound tax planning by providing fairly predictable results. While section 453 and section 1038, among other Code sections, can undoubtedly be improved, there is no need to wait for reform before clearing up the current confusion surrounding the interplay of section 1001 and the accounting provisions