
From the U.S. Code Online via GPO Access
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[Laws in effect as of January 2, 2001]
[Document not affected by Public Laws enacted between
  January 2, 2001 and January 28, 2002]
[CITE: 26USC483]

 
                     TITLE 26--INTERNAL REVENUE CODE
 
                        Subtitle A--Income Taxes
 
                  CHAPTER 1--NORMAL TAXES AND SURTAXES
 
       Subchapter E--Accounting Periods and Methods of Accounting
 
                          PART III--ADJUSTMENTS
 
Sec. 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

        For purposes of this section, a debt instrument of the purchaser 
    which is given in consideration for the sale or exchange of property 
    shall not be treated as a payment, and any payment due under such 
    debt instrument shall be treated as due under the contract for the 
    sale or exchange.

                     (3) Debt instrument defined

        For purposes of this subsection, the term ``debt instrument'' 
    has the meaning given such term by section 1275(a)(1).

(d) Exceptions and limitations

         (1) Coordination with original issue discount rules

        This section shall not apply to any debt instrument for which an 
    issue price is determined under section 1273(b) (other than 
    paragraph (4) thereof) or section 1274.

                 (2) Sales prices of $3,000 or less

        This section shall not apply to any payment on account of the 
    sale or exchange of property if it can be determined at the time of 
    such sale or exchange that the sales price cannot exceed $3,000.

                        (3) Carrying charges

        In the case of the purchaser, the tax treatment of amounts paid 
    on account of the sale or exchange of property shall be made without 
    regard to this section if any such amounts are treated under section 
    163(b) as if they included interest.

                    (4) Certain sales of patents

        In the case of any transfer described in section 1235(a) 
    (relating to sale or exchange of patents), this section shall not 
    apply to any amount contingent on the productivity, use, or 
    disposition of the property transferred.

(e) Maximum rate of interest on certain transfers of land between 
        related parties

                           (1) In general

        In the case of any qualified sale, the discount rate used in 
    determining the total unstated interest rate under subsection (b) 
    shall not exceed 6 percent, compounded semiannually.

                         (2) Qualified sale

        For purposes of this subsection, the term ``qualified sale'' 
    means any sale or exchange of land by an individual to a member of 
    such individual's family (within the meaning of section 267(c)(4)).

                       (3) $500,000 limitation

        Paragraph (1) shall not apply to any qualified sale between 
    individuals made during any calendar year to the extent that the 
    sales price for such sale (when added to the aggregate sales price 
    for prior qualified sales between such individuals during the 
    calendar year) exceeds $500,000.

                  (4) Nonresident alien individuals

        Paragraph (1) shall not apply to any sale or exchange if any 
    party to such sale or exchange is a nonresident alien individual.

(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, Sec. 224(a), Feb. 26, 1964, 78 Stat. 
77; amended Pub. L. 94-455, title XIX, Secs. 1901(b)(3)(B), 
1906(b)(13)(A), Oct. 4, 1976, 90 Stat. 1792, 1834; Pub. L. 97-34, title 
I, Sec. 126(a), Aug. 13, 1981, 95 Stat. 202; Pub. L. 97-448, title I, 
Sec. 101(g), Jan. 12, 1983, 96 Stat. 2367; Pub. L. 98-369, div. A, title 
I, Sec. 41(b), July 18, 1984, 98 Stat. 553; Pub. L. 99-121, title I, 
Secs. 101(a)(2), 102(c)(1)-(3), Oct. 11, 1985, 99 Stat. 505, 508; Pub. 
L. 99-514, title XVIII, Sec. 1803(a)(14)(B), Oct. 22, 1986, 100 Stat. 
2797.)


                               Amendments

    1986--Subsec. (d)(3). Pub. L. 99-514 substituted ``for which an 
issue price is determined under section 1273(b) (other than paragraph 
(4) thereof) or section 1274'' for ``to which section 1272 applies''.
    1985--Subsec. (b). Pub. L. 99-121, Sec. 101(a)(2)(A), struck out 
``120 percent of'' after ``discount rate equal to'' in closing 
provisions.
    Subsec. (c)(1)(B). Pub. L. 99-121, Sec. 101(a)(2)(B), amended 
subpar. (B) generally. Prior to amendment, subpar. (B) read as follows: 
``under which, using a discount rate equal to 110 percent of the 
applicable Federal rate determined under section 1274(d), there is total 
unstated interest.''
    Subsec. (e). Pub. L. 99-121, Sec. 102(c)(1), (2), redesignated 
subsec. (f) as (e), and as so redesignated substituted ``6 percent'' for 
``7 percent'' in par. (1). Former subsec. (e), which related to the 
interest rates in the case of the sales of principal residences or farm 
lands, was struck out.
    Subsec. (f). Pub. L. 99-121, Sec. 102(c)(1), redesignated subsec. 
(g) as (f). Former subsec. (f) redesignated (e).
    Subsecs. (g), (h). Pub. L. 99-121, Sec. 102(c)(1), (3), redesignated 
subsec. (h) as (g) and amended it generally, designating existing 
undesignated cross reference as par. (3), and adding pars. (1) and (2). 
Former subsec. (g) redesignated (f).
    1984--Subsec. (a). Pub. L. 98-369 amended subsec. (a) generally, 
substituting ``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'' for ``For 
purposes of this title, in the case of any contract for the sale or 
exchange of property there shall be treated as interest that part of a 
payment to which this section applies which bears the same ratio to the 
amount of such payment as the total unstated interest under such 
contract bears to the total of the payments to which this section 
applies which are due under such contract''.
    Subsec. (b). Pub. L. 98-369 amended subsec. (b) generally, 
substituting provisions directing that the present value of a payment be 
determined under the rules of section 1274(b)(2) using a discount rate 
equal to 120 percent of the applicable Federal rate determined under 
section 1274(d) for provisions which had directed that the present value 
of a payment be determined, as of the date of the sale or exchange, by 
discounting such payment at the rate, and in the manner, provided in 
regulations prescribed by the Secretary and that such regulations 
provide for discounting on the basis of 6-month brackets and provide 
that the present value of any interest payment due not more than 6 
months after the date of the sale or exchange was to have been an amount 
equal to 100 percent of such payment.
    Subsec. (c). Pub. L. 98-369 substituted ``subsection (a) applies'' 
for ``section applies'' in heading.
    Subsec. (c)(1). Pub. L. 98-369 substituted ``under which, using a 
discount rate equal to 110 percent of the applicable Federal rate 
determined under section 1274(d), there is total unstated interest'' for 
``under which, using a rate provided by regulations prescribed by the 
Secretary for purposes of this subparagraph, there is total unstated 
interest'', in subpar. (B), and struck out provision formerly set out 
following subpar. (B) which had directed that any rate prescribed for 
determining whether there was total unstated interest for purposes of 
subpar. (B) be at least one percentage point lower than the rate 
prescribed for purposes of subsec. (b)(2).
    Subsec. (c)(2). Pub. L. 98-369 substituted ``Treatment of other debt 
instruments'' for ``Treatment of other evidence of indebtedness'' in 
heading and, in text, substituted ``a debt instrument of the purchaser 
which is given in consideration for the sale or exchange of property 
shall not be treated as a payment, and any payment due under such debt 
instrument'' for ``an evidence of indebtedness of the purchaser given in 
consideration for the sale or exchange of property shall not be 
considered a payment, and any payment due under such evidence of 
indebtedness''.
    Subsec. (c)(3). Pub. L. 98-369 added par. (3).
    Subsec. (d). Pub. L. 98-369 amended subsec. (d) generally, 
substituting provisions relating to exceptions and limitations for 
provisions which related to payments indefinite as to time, liability, 
or amount.
    Subsec. (e). Pub. L. 98-369 amended subsec. (e) generally, 
substituting provisions relating to interest rates in case of sale of 
principal residence or farm land for provision relating to changes in 
terms of contract.
    Subsec. (f). Pub. L. 98-369 amended subsec. (f) generally, 
substituting provisions relating to maximum rate of interest on certain 
transfers of land between related parties for provisions which related 
to exceptions and limitations now covered in subsec. (d) of this 
section.
    Subsec. (g). Pub. L. 98-369 amended subsec. (g) generally, 
substituting provisions which related to calling for the promulgation of 
regulations by the Secretary for provisions which related to the maximum 
rate of interest on certain transfers of land between related parties 
now covered in subsec. (f) of this section.
    Subsec. (h). Pub. L. 98-369 added subsec. (h).
    1983--Subsec. (g)(4). Pub. L. 97-448 substituted ``Paragraph (1)'' 
for ``This section''.
    1981--Subsec. (g). Pub. L. 97-34 added subsec. (g).
    1976--Subsecs. (b), (c)(1)(B), (e). Pub. L. 94-455, 
Sec. 1906(b)(13)(A), struck out ``or his delegate'' after ``Secretary''.
    Subsec. (f)(3). Pub. L. 94-455, Sec. 1901(b)(3)(B), substituted 
``all of the gain, if any, on such'' for ``no part of any gain on such'' 
and ``ordinary income'' for gain from the sale or exchange of property 
other than a capital asset''.


                    Effective Date of 1986 Amendment

    Amendment by Pub. L. 99-514 effective, except as otherwise provided, 
as if included in the provisions of the Tax Reform Act of 1984, Pub. L. 
98-369, div. A, to which such amendment relates, see section 1881 of 
Pub. L. 99-514, set out as a note under section 48 of this title.


                    Effective Date of 1985 Amendment

    Amendment by Pub. L. 99-121 applicable to sales and exchanges after 
June 30, 1985, in taxable years ending after such date, see section 
105(a)(1) of Pub. L. 99-121, set out as a note under section 1274 of 
this title.


                    Effective Date of 1984 Amendment

    Amendment by Pub. L. 98-369 applicable to taxable years ending after 
July 18, 1984, and applicable to sales or exchanges after Dec. 31, 1984, 
but not applicable to any sale or exchange pursuant to a written 
contract which was binding on Mar. 1, 1984, and at all times thereafter 
before the sale or exchange, see section 44 of Pub. L. 98-369, set out 
as an Effective Date note under section 1271 of this title.


                    Effective Date of 1983 Amendment

    Amendment by Pub. L. 97-448 effective, except as otherwise provided, 
as if it had been included in the provision of the Economic Recovery Tax 
Act of 1981, Pub. L. 97-34, to which such amendment relates, see section 
109 of Pub. L. 97-448, set out as a note under section 1 of this title.


                    Effective Date of 1981 Amendment

    Section 126(b) of Pub. L. 97-34 provided that: ``The amendment made 
by subsection (a) [amending this section] shall apply to payments made 
after June 30, 1981, pursuant to sales or exchanges after such date.''


                    Effective Date of 1976 Amendment

    Amendment by section 1901(b)(3)(B) of Pub. L. 94-455 effective for 
taxable years beginning after Dec. 31, 1976, see section 1901(d) of Pub. 
L. 94-455, set out as a note under section 2 of this title.


                             Effective Date

    Section applicable to payments made after Dec. 31, 1963, on account 
of sales or exchanges of property after June 30, 1963, other than a sale 
or exchange pursuant to written contract, including an irrevocable 
written option, entered into before July 1, 1963, see section 224(d) of 
Pub. L. 88-272, set out as an Effective Date of 1964 Amendment note 
under section 163 of this title.


           Plan Amendments Not Required Until January 1, 1989

    For provisions directing that if any amendments made by subtitle A 
or subtitle C of title XI [Secs. 1101-1147 and 1171-1177] or title XVIII 
[Secs. 1800-1899A] of Pub. L. 99-514 require an amendment to any plan, 
such plan amendment shall not be required to be made before the first 
plan year beginning on or after Jan. 1, 1989, see section 1140 of Pub. 
L. 99-514, as amended, set out as a note under section 401 of this 
title.


         Treatment of Transfers of Land Between Related Parties

    Section 1803(a)(9) of Pub. L. 99-514 provided that: ``In the case of 
any sale or exchange before July 1, 1985, to which section 483(f) of the 
Internal Revenue Code of 1954 [now 1986] (as in effect on the day before 
the date of the enactment of Public Law 99-121 [Oct. 11, 1985]) applies, 
such section shall be treated as providing that the discount rate to be 
used for purposes of section 483(c)(1) of such Code shall be 6 percent, 
compounded semiannually.''


        Transitional Rule for Purposes of Imputed Interest Rules

    Provisions, respecting treatment of debt instruments received in 
exchange for property, relating to special rules for sales after Dec. 
31, 1984, and before July 1, 1985, general rule for assumptions of 
loans, exception for assumptions of loans made on or before Oct. 15, 
1984, and exception for assumptions of loans with respect to certain 
property, see section 44(b)(4)-(7) of Pub. L. 98-369, as amended, set 
out as an Effective Date note under section 1271 of this title.

                  Section Referred to in Other Sections

    This section is referred to in sections 1274, 1274A, 1275, 1288, 
4942, 7872 of this title.
