If the selling price is reduced at a later date, the gross profit on the sale will also change. You must then refigure your gross profit percentage for the remaining payments. Refigure your gross profit using the reduced sale price and then subtract the gain already reported. Spread the remaining gain over the future installments. Sale to a related person.
Special rules apply to an installment sale between related persons.
For purposes of these rules, spouses, children, grandchildren, brothers, sisters, and parents are all considered related persons. A partnership or corporation in which you have an interest, or an estate or trust with which you have a connection, can also be considered a related person. For information on these rules, see Sale to a Related Person in Publication 537 . Trading property for like-kind property. If you trade business or investment property solely for the same kind of property, you can postpone reporting the gain.