Installment Land Contract

In depth

An installment land contract is the IRS-recognized name for a sale paid in two or more tax-year installments where the seller retains title until paid. It triggers installment sale treatment under IRC Section 453, allowing the seller to defer capital gains over the life of the contract. The buyer holds equitable title and the seller retains a security interest in the property. Misconception: installment land contracts are not the same as a mortgage; legal title transfer is delayed, which changes default remedies and tax reporting. Practically, both parties should record either the full contract or a memorandum, complete Form 6252 for tax reporting, and ensure the stated interest rate equals or exceeds the AFR to avoid imputed interest. State law determines whether forfeiture or foreclosure applies on default.