Which of the following is (are) a taxable disposition of an installment obligation?
A)(1) only.
B)(1) and (2).
C)(2) and (3).
D)(1) and (3).
E)None of the above.

Question

Which of the following is (are) a taxable disposition of an installment obligation? 
A)(1) only. 
B)(1) and (2). 
C)(2) and (3). 
D)(1) and (3). 
E)None of the above.

Quizplus · Accepted Answer

(1) Selling or disposing of the installment obligation.
(3) Converting the installment obligation into a non-installment obligation.
Both of these actions would trigger a taxable event for the seller of the installment obligation. Option (2) - paying off the installment obligation - would not trigger a taxable event.

Which of the Following Is (Are) a Taxable Disposition of an Installment