View all text of Part III [§ 481 - § 483]
§ 483. Interest on certain deferred payments
(a) Amount constituting interest
For purposes of this title, in the case of any payment—
(1) under any contract for the sale or exchange of any property, and
(2) to which this section applies,
there shall be treated as interest that portion of the total unstated interest under such contract which, as determined in a manner consistent with the method of computing interest under section 1272(a), is properly allocable to such payment.
(b) Total unstated interest
For purposes of this section, the term “total unstated interest” means, with respect to a contract for the sale or exchange of property, an amount equal to the excess of—
(1) the sum of the payments to which this section applies which are due under the contract, over
(2) the sum of the present values of such payments and the present values of any interest payments due under the contract.
For purposes of the preceding sentence, the present value of a payment shall be determined under the rules of section 1274(b)(2) using a discount rate equal to the applicable Federal rate determined under section 1274(d).
(c) Payments to which subsection (a) applies
(1) In general
Except as provided in subsection (d), this section shall apply to any payment on account of the sale or exchange of property which constitutes part or all of the sales price and which is due more than 6 months after the date of such sale or exchange under a contract—
(A) under which some or all of the payments are due more than 1 year after the date of such sale or exchange, and
(B) under which there is total unstated interest.
(2) Treatment of other debt instruments
(3) Debt instrument defined
(d) Exceptions and limitations
(1) Coordination with original issue discount rules
(2) Sales prices of $3,000 or less
(3) Carrying charges
(4) Certain sales of patents
(e) Maximum rate of interest on certain transfers of land between related parties
(1) In general
(2) Qualified sale
(3) $500,000 limitation
(4) Nonresident alien individuals
(f) Regulations
The Secretary shall prescribe such regulations as may be necessary or appropriate to carry out the purposes of this section including regulations providing for the application of this section in the case of—
(1) any contract for the sale or exchange of property under which the liability for, or the amount or due date of, a payment cannot be determined at the time of the sale or exchange, or
(2) any change in the liability for, or the amount or due date of, any payment (including interest) under a contract for the sale or exchange of property.
(g) Cross references
(1) For treatment of assumptions, see section l274(c)(4).
(2) For special rules for certain transactions where stated principal amount does not exceed $2,800,000, see section 1274A.
(3) For special rules in case of the borrower under certain loans for personal use, see section 1275(b).
(Added Pub. L. 88–272, title II, § 224(a), Feb. 26, 1964, 78 Stat. 77; amended Pub. L. 94–455, title XIX, §§ 1901(b)(3)(B), 1906(b)(13)(A), Oct. 4, 1976, 90 Stat. 1792, 1834; Pub. L. 97–34, title I, § 126(a), Aug. 13, 1981, 95 Stat. 202; Pub. L. 97–448, title I, § 101(g), Jan. 12, 1983, 96 Stat. 2367; Pub. L. 98–369, div. A, title I, § 41(b), July 18, 1984, 98 Stat. 553; Pub. L. 99–121, title I, §§ 101(a)(2), 102(c)(1)–(3), Oct. 11, 1985, 99 Stat. 505, 508; Pub. L. 99–514, title XVIII, § 1803(a)(14)(B), Oct. 22, 1986, 100 Stat. 2797.)