5.29 Repossession of Personal Property Sold on Installment
When a buyer defaults and you repossess personal property, either by a voluntary surrender or a foreclosure, you may realize gain or loss. The method of calculating gain or loss is similar to the method used for disposition of installment notes (5.28). Gain or loss is the difference between the fair market value of the repossessed property and your basis for the installment obligations satisfied by the repossession. This rule is followed whether or not title was kept by you or transferred to the buyer. The amount realized is reduced by costs incurred during the repossession. The basis of the obligation is face value less unreported profit.
If the property repossessed is bid in at a lawful public auction or judicial sale, the fair market value of the property is presumed to be the purchase or bid price, in the absence of proof to the contrary.
Gain or loss in the repossession is reported in the year of the repossession.
Fair market value of property repossessed | $ 1,400 |
Basis of the buyer’s notes at ... |
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