What Is an Installment Sale? An installment sale is a sale of property where you receive atleast one payment after the close of the tax year of the sale. Theinstallment sale rules do not apply to the regular sale of inventory.See Sale of a Business under Other Rules, later. If a sale qualifies as an installment sale, you must report thegain on the sale under the installment method unless you elect torecognize gain under your regular method of accounting. Under theinstallment method, you report prorated gain on the sale only aspayments are received. It does not matter whether you use the cash oraccrual method of accounting. However, accrual method taxpayers shouldsee the Caution in the Introduction, earlier.For information on recognizing the entire gain in the year of sale,see Electing Out of Installment Method under OtherRules, later. TaxTip: If you finance the purchase of your property, instead of having thebuyer get a loan or mortgage from a third party, you probably have aninstallment sale. It is not an installment sale if the buyer borrowsthe money from a third party and then pays you the total sellingprice.