When a shareholder receives an installment note attributable to a sale of property by a liquidating corporation, receipt of the note is always treated as full payment for the stock for Federal income tax purposes.

Question

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The receipt of an installment note from a liquidating corporation may or may not be treated as full payment for the stock depending on certain factors. The tax treatment will depend on whether the note is considered to be a security, whether the shareholder is treated as selling the note or the stock, and whether the corporation is considered to be a dealer in the property being sold.

When a Shareholder Receives an Installment Note Attributable to a Sale