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MenuAre promissory note installments considered capital gains? I'm selling my website and would love insight on the financial details.
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Yo are talking apples and oranges. Capital gains are related to your basis not the form of payment. If you are a cash basis taxpayer, you pay taxes when you receive cash beyond your basis. We can help you with structure.
Under U.S. federal tax rules this arrangement would likely be treated as an installment sale. If you sell the website and are eligible for long term capital gain treatment, the long term capital gain treatment would apply to the initial cash payment, as well as subsequent payments made under the installment agreement.
You would compute your gross profit percentage on the sale of the asset, and apply that profit percentage to all future payments to determine how much of each payment is installment sale income.
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