Robert sold his business for cash plus the purchaser’s agreement to make payments for approximately 60 percent of the purchase price over a ten year period. He needed advice about how to report the transaction in order to minimize his tax liability on the sale.
Concerned the purchaser might not be able to make the required payments, Robert initially anticipated using the installment method of reporting. However, a substantial first installment payment increased Robert’s confidence that the remaining payments would be made. His JMG advisor, anticipating higher tax rates in the future, counseled Robert to elect out of the installment method on the day before his return was filed, saving him in excess of $1 million in tax on the sale.