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Unformatted text preview: the funds placed in escrow. If the escrowed funds are constructively received by the seller, then the use of the installment method may be denied to the seller. However, if the seller's right to enjoy the trust or escrow funds is subject to a substantial restriction or condition, then the taxpayer is not currently taxable under the economic benefit theory. No, Eagle is not eligible to use the installment method. In fact, the cited authorities above indicate that amounts placed in escrow constitute constructive receipt by the seller. As a result, the entire sales price is considered to have been received by Eagle in 2010. In the absence of any contrary authority, the entire gain is taxable in 2010. In the situation described, financial security and tax security are inversely related. Since the seller faces little financial risk, the gain is taxable in the year of sale. References Internal Revenue Rev. Rul. 77-294, 1977-2 C. B. 173 Internal Revenue Rev. Rul. 79-91, 1979-1 C. B. 179...
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- Spring '10
- Finance, Taxation in the United States, Eagle, Escrow