2023 Laws of Puerto Rico › TITLE THIRTEEN - Taxation and Finance (§§ 1 — 33423) › Subtitle 17 - Internal Revenue Code of 2011 (§§ 30001 — 33423) › PART II - Income Taxes (§§ 30041 — 30622) › Chapter 1006 - Accounting Periods and Methods of Accounting (§§ 30171 — 30182) › § 30175 - Installment sales

(a) Personal property dealer. — A person who regularly sells or otherwise disposes of personal property through the installment plan may, in the manner prescribed by the Secretary through regulations, declare on any taxable year as income from said transactions, a ratable part of the installment payments effectively received during such year in which the gross gain realized or to be realized when the total payment is made, with the total contract price.
(b) Casual sale of personal property and sale of real property. — In the case of:
(1) A casual sale or other casual disposition of personal property (other than property that because of its nature should be properly included in the taxpayer’s inventory if on hand at the close of the taxable year), for a price in excess of one thousand dollars ($1,000), or
(2) of a sale or other disposition of real property, if in any of such cases the initial payments, if any, did not exceed thirty percent (30%) of the sales price, the income may under the regulations prescribed by the Secretary be declared over the basis and in the manner provided in this section.
(3) As used in this section the term “initial payments” means payments received in cash or property other than buyer’s proof of indebtedness, during the taxable period in which the sale or other disposition was made.
(c) Use of installment obligations as loan security. — In such cases in which the taxpayer uses an installment obligation to secure a loan, the proceeds of such loan shall be treated as a payment of the installment obligation. However, in case the loan is obtained in the ordinary course of the taxpayer’s trade or business and it is secured, among other assets, by an installment obligation received from the sale of property in the ordinary course of his/her trade or business, only the excess of the proceeds of the loan over the basis of the installment obligation and of the other assets shall be treated as payment of the installment obligation.
(d) Change from the accrual method to the installment sales method. — If a taxpayer entitled to the benefits of subsection (a) elects to declare his/her net income on the installment basis for any taxable year, then, in computing his/her income for the year of the change or any subsequent year, the amounts effectively received during any of said years on account of sales or other disposition of property made in any prior year shall not be excluded.
(e) Gain or loss on disposition of installment obligations. —
(1) If an installment obligation is satisfied at other than its face value or distributed, transferred, sold or otherwise disposed of, gain or loss shall result to the extent of the difference between the basis of the obligation, and
(A) in the case of payment at other than face value or of a sale or exchange, the amount realized, or
(B) in the case of a distribution, transfer, or disposition other than by sale or exchange, the fair market value of the obligation at the time of such distribution, transfer or disposition.
(2) Any such gain or loss shall be deemed as resulting from the sale or exchange of the property in respect to which the installment obligation was received. The basis of the obligation shall be the excess of the face value of the obligation over an amount equal to the income which would be declarable if the obligation had been paid in full.
(3) This subsection shall not apply to the transfer by death of installment obligations if a bond is filed with the Secretary at such time as he/she may prescribe by regulations, in such amount and with such sureties as he/she may deem necessary, conditioned on the declaration as income by the person receiving any payment on such obligations the same proportion of such payment that would be declared as income by the decedent if he/she had lived and received such payment.
(4) If an installment obligation is distributed by one corporation to another corporation in the course of a liquidation, subject to § 30144(b)(6) of this title and the basis of the installment obligation in the hands of the recipient is determined under § 30142(a)(13)(B) of this title, then no gain or loss whatsoever shall be recognized with respect to the distribution of such obligation in the case of the distributor or transferor corporation.
History —Jan. 31, 2011, No. 1, § 1040.05, retroactive to Jan. 1, 2011.