Perlin v. Commissioner
United States Tax Court
T.C. Memo. 1993–79 (1993)
- Written by Brianna Pine, JD
Facts
In 1983, Leon Perlin (plaintiff) agreed to sell certain income-producing property to Realtec Incorporated. Under the parties’ agreement, Realtec agreed to make a $750,000 cash payment in 1984 and execute a $250,000 contingent promissory note, payable in 10 years only if the property’s market value reached at least $2 million. The note accrued no interest during the 10-year deferral period and included a provision allowing Realtec to prepay at any time. On his 1984 tax return, Perlin reported the sale price as $850,000, comprising the cash payment and a discounted present value of $100,000 for the contingent note. The commissioner of the Internal Revenue Service (defendant) assessed a deficiency, asserting that, under the tax code’s installment-sale rules, the full $250,000 face value of the note must be included in the computation of the maximum selling price due to Realtec’s prepayment right. Perlin petitioned the tax court for a redetermination.
Rule of Law
Issue
Holding and Reasoning (Parker, J.)
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