It is not unusual for a taxpayer in a like-kind exchange to receive both like-kind property and an installment note in exchange for the taxpayer's relinquished property.
In other cases, it is not uncommon for a taxpayer to enter into a deferred exchange in connection with the sale of the taxpayer's relinquished property but fail to enter identify or acquire replacement property.
An installment sale is defined as a disposition of property where at least one payment is to be received after the close of the taxable year in which the disposition occurs. As a general rule, each year taxable gain is recognized in the amount of the "gross profit ratio."
The tax consequences of the receipt of an installment note in a like-kind exchanges will generally result in following consequences:
Fortunately, immediate taxation in the year of sale and thereafter can be avoided with several specific tax techniques.