80 terms · Alphabetical · Each definition is shared with the tooltips, the FAQ, and search.
A
- Adjusted basis
- Tax cost after applicable adjustments, including depreciation or amortization. Why it matters: It is a starting point for gain; it is not necessarily the final installment basis. Explore this topic →
- Annuity
- An insurance contract providing payments under its terms. Why it matters: The seller may have rights against an assignment company without owning its funding annuity. Explore this topic →
- Applicable Federal Rate (AFR)
- An IRS-published reference rate used in specified federal tax calculations involving debt. Why it matters: It helps test adequate interest; it is not the SIS provider’s promised return. Explore this topic →
- Asset sale
- A sale of identified assets rather than the entity’s ownership interests. Why it matters: Different assets can produce different gain character and installment eligibility. Explore this topic →
- Assignment company
- The legal entity that assumes primary responsibility for the buyer’s deferred-payment obligation as co-obligor; its obligation is in addition to, not in substitution of, the buyer’s, and the buyer retains fallback liability. Why it matters: Identify its promise, financial support, and any guarantee separately from the funding issuer, and confirm the recourse sequence (assignment company first, buyer on its default). Explore this topic →
- Authorized Control Level (ACL)
- The RBC benchmark used as the denominator in the life-insurer intervention table. Why it matters: A ratio to ACL is not the same as a ratio to Company Action Level. Explore this topic →
B
- Balloon payment
- A scheduled large payment, often near the end of an obligation. Why it matters: Availability and tax treatment depend on the contract; a balloon is different from a contingent earnout. Explore this topic →
- Basis recovery
- The portion of receipts treated as recovery of tax investment rather than gain. Why it matters: For a normal fixed-price sale, each principal payment generally contains proportionate basis and gain. Explore this topic →
- Beneficiary
- A person or entity entitled to receive a specified benefit under a contract or estate arrangement. Why it matters: Beneficiary rights and income-tax treatment need coordination; death does not erase deferred gain. Explore this topic →
- Buyer fallback liability
- A buyer’s continuing responsibility if another obligor fails to pay, as the documents provide. Why it matters: Do not promise that every SIS fully releases the buyer. Explore this topic →
C
- Capital gain
- Gain from the sale or exchange of a capital asset, with treatment depending on holding period and other rules. Why it matters: Not every component of a business sale or installment payment is capital gain. Explore this topic →
- Cash-equivalence doctrine
- A doctrine assessing when a promise or property is sufficiently like cash to be currently taxable. Why it matters: Funding, security, transferability, and other facts need analysis; one label does not decide timing. Explore this topic →
- Claims-paying ability
- An insurer’s financial capacity to meet obligations under its contracts. Why it matters: A contractual guarantee depends on the responsible entity’s ability to perform. Explore this topic →
- Co-obligor
- An additional party bound on an existing obligation alongside the original obligor. In an SIS, the assignment company is a co-obligor: it takes primary responsibility for the scheduled payments while the buyer remains liable as a fallback. Why it matters: The assignment company is a co-obligor, not a substitute obligor — the buyer is not released. The substitute-obligor authorities approve a greater change than the SIS makes. Explore this topic →
- Commutation
- Conversion of future payment rights into a current lump-sum amount under permitted terms. Why it matters: A discounted death payment can concentrate income and may require a special election before funding. Explore this topic →
- Constructive receipt
- Income made available without substantial restrictions can be taxable even if not physically collected. Why it matters: Routing cash elsewhere after the seller can demand it does not necessarily preserve deferral. Explore this topic →
- Contingent payment
- A payment whose amount depends on future events or conditions. Why it matters: A maximum price and a fixed payment period lead to different basis-recovery rules. Explore this topic →
- Contract price
- The installment-rule amount used as the denominator for the gross-profit percentage. Why it matters: It can differ from selling price because of assumed liabilities and other adjustments. Explore this topic →
- Covenant not to compete
- A contractual promise restricting a seller’s competitive activity. Why it matters: Seller consideration is generally ordinary income and needs separate timing and product review. Explore this topic →
- Credit risk
- The risk that a party owing money will not perform. Why it matters: Evaluate the obligor, issuer, guarantor, and buyer recourse as distinct sources of payment. Explore this topic →
D
- Debt relief
- Discharge, assumption, or taking property subject to liabilities in a transaction. Why it matters: A mortgage payoff and buyer-assumed debt can have different installment consequences. Explore this topic →
- Deferred gain
- Gain from a completed sale that has not yet been recognized under an applicable rule. Why it matters: Deferral changes timing; it does not itself exclude the gain from tax. Explore this topic →
- Deferred Sales Trust
- A marketed installment arrangement using a third-party trust as part of the transaction. Why it matters: It is different from an SIS and from a Delaware statutory trust; actual facts determine tax treatment. Explore this topic →
- Delaware statutory trust
- A legal trust form often used to hold real-estate investments. Why it matters: The same initials, DST, also describe a very different marketed Deferred Sales Trust arrangement. Explore this topic →
- Disposition of an installment obligation
- A sale, exchange, distribution, satisfaction, or other event addressed by §453B. Why it matters: A later transfer or restructuring can accelerate deferred gain. Explore this topic →
E
- Earnout
- Consideration dependent on post-sale results or other specified events. Why it matters: Determine whether it is purchase price or compensation and which contingent-payment rules apply. Explore this topic →
- Economic-benefit doctrine
- A doctrine that can require current income when a taxpayer obtains a vested economic benefit through funded property or rights. Why it matters: The seller’s ownership and access to funding assets need analysis beyond cash receipt. Explore this topic →
- Election out of installment reporting
- A timely election to report an otherwise eligible sale without the installment method. Why it matters: Eligible sales generally use the method automatically; an election out is not an election in. Explore this topic →
- Entity tax classification
- The federal tax treatment of a business form, such as disregarded entity, partnership, or corporation. Why it matters: An LLC’s legal name alone does not identify who reports the sale. Explore this topic →
- Escrow
- Property or funds held by a third party under specified release conditions. Why it matters: Control and restrictions determine whether it delays receipt; the word escrow is not enough. Explore this topic →
F
- Form 1062
- The IRS form for the qualified-farmland tax-payment election. Why it matters: The election filing deadline and the first payment deadline differ when a return is extended; proposed regulations (REG-117095-25, Sept. 29, 2026) address the election mechanics. Explore this topic →
- Form 6252
- The IRS form for reporting installment-sale income. Why it matters: Maintain principal, basis, and gain schedules; provider information returns may not give the final taxable amount. Explore this topic →
- Form 8594
- The IRS asset-acquisition statement used for applicable business-asset purchases and sales. Why it matters: Buyer and seller allocations should be supported and appropriately reconciled. Explore this topic →
- Funding agreement
- A contract used to fund obligations that is legally distinct from an annuity. Why it matters: Product, tax, ownership, and guaranty coverage must be checked for the actual instrument. Explore this topic →
G
- Going-concern value
- Value associated with an operating business’s ability to continue functioning. Why it matters: It is an intangible requiring appropriate allocation and basis analysis. Explore this topic →
- Goodwill
- Value associated with a business’s reputation, customer relationships, or expected continued patronage. Why it matters: Acquired amortized goodwill can have ordinary recapture; personal ownership requires evidence. Explore this topic →
- Gross profit
- The gain used in the installment computation after the required adjustments. Why it matters: It is not the same as gross sale proceeds or a payment’s interest component. Explore this topic →
- Gross-profit percentage (GPP)
- Installment gross profit divided by contract price. Why it matters: Apply it to principal payments; contingent sales and price changes can require different calculations. Explore this topic →
- Guarantee
- An enforceable promise by a specified party to support another obligation, subject to its terms. Why it matters: Identify who can enforce it and against whom; it is not a government guarantee. Explore this topic →
- Guaranty association
- A state-law system providing limited protection for eligible insurance benefits after covered insurer insolvencies. Why it matters: Eligibility, contract type, ownership, state rules, present value, and aggregation come before any dollar cap. Explore this topic →
I
- Illiquidity
- Limited ability to turn an asset or payment right into cash when needed. Why it matters: An SIS schedule should leave adequate funds outside the structure for emergencies and taxes. Explore this topic →
- Imputed interest
- Interest determined under tax rules when a transaction’s stated interest is insufficient or otherwise requires adjustment. Why it matters: Part of a deferred amount may be ordinary interest rather than sale principal. Explore this topic →
- Income in respect of a decedent (IRD)
- Income attributable to a deceased person that remains taxable when received by the appropriate successor. Why it matters: Deferred installment gain generally does not receive the ordinary inherited-basis step-up. Explore this topic →
- Inflation risk
- The risk that future payments buy less as prices rise. Why it matters: A fixed nominal payment guarantee does not guarantee purchasing power. Explore this topic →
- Installment basis
- The basis amount used in the installment computation after required adjustments, including specified expenses and recognized recapture. Why it matters: It can exceed the asset’s adjusted basis and changes the gain percentage. Explore this topic →
- Installment method
- Reporting eligible gain proportionately as sale principal is received under §453. Why it matters: At least one payment must follow the sale tax year, and exclusions and acceleration rules still apply. Explore this topic →
- Interest
- Income compensating for the use or deferral of money. Why it matters: It is generally ordinary income and is analyzed separately from principal gain and basis. Explore this topic →
- IRC §453
- The principal federal installment-method statute. Why it matters: It governs eligibility and recognition; it does not approve every funded SIS structure. Explore this topic →
- IRC §453A
- Rules for interest on certain deferred tax and for certain loans secured by installment obligations. Why it matters: The $5 million interest threshold does not exempt smaller notes from the separate pledge rule. Explore this topic →
- IRC §453B
- Rules for gain or loss on disposition of installment obligations and specified exceptions. Why it matters: Distinguish a creditor’s transfer of a receivable from a debtor’s assignment of its duty. Explore this topic →
- IRMAA
- Medicare’s income-related monthly adjustment amount for higher-income beneficiaries. Why it matters: Payment timing can affect premiums under income and lookback rules distinct from capital-gain tax brackets. Explore this topic →
L
- Liquidation
- Winding up an entity and distributing its assets or proceeds. Why it matters: Distributing a payment right can be a separate taxable event with conditional exceptions. Explore this topic →
M
- Modified adjusted gross income (MAGI)
- Adjusted gross income modified as a particular tax or benefit rule specifies. Why it matters: NIIT and Medicare do not necessarily use identical income definitions. Explore this topic →
- Monetized installment sale
- An installment-sale arrangement paired with a loan intended to deliver near-term cash to the seller. Why it matters: The 2023 listing regulations (REG-109348-22) remained proposed as of October 17, 2026; pledge and other tax rules require separate analysis. Explore this topic →
N
- Net Investment Income Tax (NIIT)
- A 3.8% federal tax on specified net investment income above applicable income thresholds. Why it matters: It is not automatically 3.8% of every sale payment, and not all business gain is included. Explore this topic →
- Non-qualified assignment
- An assignment of a payment obligation outside the §130 qualified-assignment regime. Why it matters: The term does not establish §453 eligibility or IRS approval. Explore this topic →
- Novation
- A contractual replacement of an obligation or obligor with the required consent. Why it matters: Its tax effect depends on rights and facts, not the label alone. Explore this topic →
O
- Obligor
- The party legally required to perform an obligation. Why it matters: Identify whether the seller can enforce against the buyer, assignee, issuer, or a guarantor. Explore this topic →
- Origin-year group (vintage)
- Installment obligations grouped by the tax year in which they arise for the §453A interest calculation. Why it matters: The applicable percentage for the group is determined at that year-end and retained later. Explore this topic →
- Original issue discount (OID)
- Generally, a debt instrument’s stated redemption amount above its issue price, excluding qualified stated interest as provided by the rules. Why it matters: Annual taxable accrual can occur before cash payments. Explore this topic →
P
- Pledge rule
- The §453A(d) rule treating certain secured loan proceeds as installment payments. Why it matters: It can apply below the $5 million interest threshold; contract restrictions are separate. Explore this topic →
- Present value
- Today’s value of future amounts using an identified discount method. Why it matters: Guaranty limits and commutation amounts can depend on present value rather than nominal payment totals. Explore this topic →
- Principal
- The sale-price or debt component of a payment, apart from interest. Why it matters: In installment reporting it is generally split between basis and gain. Explore this topic →
- Private letter ruling (PLR)
- An IRS written determination for a requesting taxpayer and specified transaction. Why it matters: It is not precedent or general approval of a product. Explore this topic →
Q
- Qualified assignment
- An assignment meeting §130’s requirements for specified excludable injury or workers’ compensation payments. Why it matters: An ordinary asset-sale SIS uses a different tax framework. Explore this topic →
- Qualified small business stock (QSBS)
- Stock meeting §1202’s requirements for a possible gain exclusion. Why it matters: Acquisition date, issuance, holding period, business, and holder requirements must be tested. Explore this topic →
R
- Recapture (§1245 and ordinary §1250)
- Specified prior deductions treated as ordinary income on disposition. Why it matters: Actual recapture is recognized in the sale year under §453(i), unlike deferrable unrecaptured §1250 gain. Explore this topic →
- Risk-Based Capital (RBC)
- An insurance supervisory capital framework reflecting specified risks. Why it matters: Use the correct denominator and state rules; a ratio is not a promise of solvency. Explore this topic →
S
- Section 1031 exchange
- A qualifying exchange of real property held for investment or business use. Why it matters: Reinvestment, property qualification, and deadlines differ from installment-sale requirements. Explore this topic →
- Section 1062 election
- An election to pay specified tax from a qualifying farmland sale in four annual installments. Why it matters: It defers tax payment, with qualification and acceleration rules, rather than generally deferring gain recognition. Proposed regulations under §1062 were published September 29, 2026 (REG-117095-25; comments due November 30, 2026). Explore this topic →
- Section 121 exclusion
- A possible exclusion of eligible principal-residence gain subject to ownership, use, and other requirements. Why it matters: The $250,000 or qualifying $500,000 maximum is not automatic; only remaining eligible gain needs deferral. Explore this topic →
- Section 1231 gain
- A special netting regime for specified business-property gains and losses, with a lookback rule. Why it matters: Long-term capital-gain treatment cannot be assumed from the asset’s business use alone. Explore this topic →
- Seller note
- A buyer’s debt obligation issued to the seller as part of the purchase price. Why it matters: Credit risk, security, transferability, and tax treatment depend on its terms. Explore this topic →
- Selling price
- The total consideration for the property under the tax rules, excluding interest. Why it matters: It can differ from contract price, net closing cash, and the amount funded into an SIS. Explore this topic →
- Source income
- Income connected to a jurisdiction under its tax rules. Why it matters: Relocation does not necessarily eliminate tax in the state connected to the sold asset. Explore this topic →
- Step-up in basis
- A common description of inherited basis determined by date-of-death value, subject to exceptions. Why it matters: IRD, including deferred installment gain, is excluded from the normal §1014 rule. Explore this topic →
- Stock sale
- A sale of corporate ownership interests rather than a direct sale of corporate assets. Why it matters: Check §1202, market-traded exclusions, and any deemed asset-sale election. Explore this topic →
- Structured settlement
- A periodic-payment resolution of a claim, often involving qualifying injury compensation. Why it matters: Its exclusion and assignment rules are not interchangeable with a taxable asset-sale SIS. Explore this topic →
U
- Unrecaptured §1250 gain
- A capital-gain rate category associated with specified depreciation on real property, generally subject to a maximum 25% federal rate. Why it matters: It may be installment-reported and is not ordinary §1250 recapture automatically due at sale. Explore this topic →