installment buying and selling

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installment buying and selling,

buying and selling of goods on credit, with the stipulation that payments shall be made at specified intervals in set amounts. The goods may be used by the buyer before or upon first payment, but legally belong to the seller until the last payment has been made. If the buyer defaults, the seller reclaims the goods, and all former payments are forfeit. The layaway plan is another form of installment purchase, in which the merchandise is held by the retailer until the total selling price of the item has been paid. The installment buyer pays a higher price, the difference covering interest on unpaid balances, insurance, and financing charges. Originating in Paris in the early 19th cent., the practice of retailing goods on the installment plan was first used in the United States to sell sewing machines, pianos, and household furnishings to low-income consumers. After 1916, when manufacturers began to offer automobiles on the time-payment plan, installment selling rapidly came to include durable goods of every kind (household appliances, radios, oil burners), which otherwise would have been out of reach for the average income earner. Today, large merchandisers often issue their own credit cards, and banks frequently offer personal loans to consumers that may be repaid in installments. In recent years, installment buying has become common at all income levels, particularly in the financing of automobiles and real estate properties. The credit cardcredit card,
device used to obtain consumer credit at the time of purchasing an article or service. Credit cards may be issued by a business, such as a department store or an oil company, to make it easier for consumers to buy their products.
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 has shifted the risk of delinquent payments from the merchant to the issuer of the credit card, in many cases a bank.


See E. N. Compton, The New World of Commercial Banking (1987).

References in periodicals archive ?
Using an installment sale rather than reporting all of the gain in one year, is one way to minimize taxes.
453A that applies to certain installment sale obligations.
Would an installment sale be an appropriate device for transferring the McCourts' highly appreciated, low-basis office building to their children?
If the stated interest rate on an installment sale note is not "fair market" in the eyes of the IRS, the IRS may input a fair interest rate.
Both the installment sale and the private annuity are used to transfer future appreciation through sale of property (e.
cash sale, installment sale and [section]1031 transaction), (2) gauge the risks involved, and (3) determine the overall tax impact of the transaction.
In a 1031 exchange, this "cash boot" (boot caused by receipt of cash) is subject to the installment sale rules, meaning that the proceeds are taxed when you receive them.
The installment sale is a device for spreading out the taxable gain and thereby deferring the income tax on gain from the sale of property.
A question arose on the TaxTalk list-serve regarding California tax implications when a California resident is about to sell a California corporation's stock via an installment sale, but will be moving out of state "to avoid the California tax on the sale.
Generally, an accrual basis taxpayer must recognize the entire amount of the gain from the installment sale in the year of the sale.
With assets other than stock, you may be able to structure an installment sale.
Since Griffith involved an installment sale, the key issue was whether year-of-sale payments received by the taxpayer-seller exceeded 30 percent of the sale price (thus disallowing the installment sales reporting method).