One option is to structure the sale as an installment sale. Here the buyer pays the cost of the property plus interest in regular installments, perhaps for 5 years, enabling the seller to reflect the gain for tax purposes over the entire payment period. Alas, the installment sales method can’t be used for the following: • Sale of inventory.
How to sell your business using installment sales and Earnouts?
Selling Your Business Using Installment Sales and Earnouts. If you are planning on selling your business, you have more options than ever before. One increasingly popular option is to sell the business using installments. In this situation, the buyer will typically pay a down payment, and then the seller will finance the rest of the deal.
Do you have to pay interest on installment sales?
If your sale calls for payments in a later year and the sales contract provides for little or no interest, you may have to figure unstated interest, even if you have a loss. Sellers who decide on this strategy are cautioned, however, that an installment sale carries more risk than an outright sale of the property.
What are the components of an installment sale?
I use the term generally because there are some major exceptions to the rule, such as sales of inventory, dealer sales and sales of publically traded stock. Each payment on an installment sale usually consists of the following three parts: 1) interest income, 2) return on basis and 3) gain on the sale.
How does installment sale work in South Africa?
A person wishing to purchase a property in South Africa may conclude what is known as an “Installment Sale Agreement” (Instalment Sale Agreement) in terms of which the purchase price is paid in installments. The contract provides certain protection to the parties in that the contract itself may be registered at the relevant deeds office.
What do you need to know about selling a commercial property?
If you have a commercial property to sell, there are numerous factors to be aware of. You will need to have an understanding of the legislation surrounding commercial property sales, local property values and an awareness of what commercial property buyers are looking for from sellers.
What should be included in an installment sale agreement?
Various information must be disclosed in the Installment Sale agreement including obviously the names of the buyer and the seller, the purchase price and the description of the property but also other information such as the name of the mortgagee and the transfer duty payable.
