TXX5768

1)Which of the following statements is false?

	A.	The taxpayer may make an affirmative election on the tax return to NOT have the installment method of reporting apply.
	B.	An installment sale is the disposition of property where at least one payment of the purchase price is received by the seller in a tax year subsequent to the year in which the sale occurred.
	C.	Because the use of the installment method is automatic, it applies to both gains and losses unless the taxpayer makes an affirmative election to not have the installment method apply.
	D.	Generally, the installment method of tax reporting is NOT available for the sale of "dealer property" or the sale of inventory held for sale to customers in the ordinary course of business.

2)Which of the following statements is false?

	A.	The installment method of tax reporting is NOT available for transactions where the sales price of the property is contingent upon future events.
	B.	If the taxpayer makes the election to NOT have the installment method apply in the year of sale, the taxpayer will pay tax on the entire gain in the year of sale despite not collecting the sales price until many years in the future especially if the taxpayer receives the sales price in the form of a long-term promissory note.
	C.	The installment method requires the taxpayer to report as gain a pro-rata portion of the principal collected on the buyer's note by multiplying the principal collected by the gross profit ratio. The gross profit ratio is determined by dividing the gross profit on the sale by the total sales price.
	D.	ALL of the above statements are true.