Installment Sale 2 months apart?

[Daniel Chang]

I do plan to talk to my tax advisor about this.  But this is crunch time tax season, and it's hard to get ahold of him.  Just wanted to see if anyone here as an idea so I can at least start brainstorming a little.

If I'm in escrow selling a property, and the close date is in November.  That is <2 months from a new fiscal year.  Does anyone know if it is allowed to do an installment sale (or seller's financing...both are the same thing essentially), where buyer pays half on closing and half 1/2/2023 (<2 months later)?  My thought was to split the tax hit over 2 years instead of one.  My reading of IRS regulations seem to allow it, but nothing is specifically mentioned about <2 months between payments as long as it crosses a new fiscal year.

(Yes I'm aware of other options such as 1031, DST's, etc etc. I'm exploring the "just take the tax hit" option.)

[Dave Foster]

@Daniel Chang, Kudos for thinking outside the box.  But there may be a better way that avoids some of the downside potentials that  @Michael Plaks rightfully noted.  Sell the property regularly and start a 1031 exchange.  Make sure to close your sale no earlier than 11/17/2022.  There is no penalty for starting and not completing a 1031 exchange.  So let it die by not turning in a 45 day identification form.  Your exchange will die on day 46.  Which will happen to fall in the 2023 tax year.

So when your accountant files your tax return for tax year 2022 they will actually report the 1031 exchange as an installment sale with all of the proceeds received in 2023.  This pushes your payment date to April of 2024.  Accomplishes everything you want.  But rather than the risk of an installment sale to an unknown 3rd party you only have to pay a small fee to set up a 1031.