26 U.S.C. § 483 — Interest on certain deferred payments

(a) Amount constituting interest. For a payment under a contract to sell or exchange property, if this section applies to that payment, part of it is treated as interest — figured out the same way as unstated interest is computed under section 1272(a), as the portion of the contract's "total unstated interest" that is properly allocable to that payment. (b) Total unstated interest. To find a contract's "total unstated interest": start with the total of all payments this section applies to that are due under the contract. Subtract the present value of those payments, plus the present value of any interest payments due under the contract. The result is the total unstated interest. To find the present value of a payment, use the rules in section 1274(b)(2), with a discount rate equal to the "applicable Federal rate" determined under section 1274(d). (c) Payments this section applies to. (1) In general. Except as subsection (d) provides, this section applies to a payment that is part or all of a sales price for property, and that is due more than 6 months after the sale or exchange, under a contract where: (A) some or all payments are due more than 1 year after the sale or exchange, and (B) there is total unstated interest. (2) Other debt instruments. A debt instrument the purchaser gives as part of the deal is not itself treated as a "payment"; instead, any payment due under that debt instrument is treated as due under the sale contract. (3) "Debt instrument" has the meaning given in section 1275(a)(1). (d) Exceptions and limitations. (1) Original issue discount coordination. This section does not apply to a debt instrument that already has an issue price determined under section 1273(b) (other than paragraph (4)) or section 1274. (2) Sales of $3,000 or less. This section does not apply to a payment if, at the time of the sale or exchange, it can already be determined that the sales price cannot go over $3,000. (3) Carrying charges. For the purchaser, if amounts paid on account of the sale are already treated under section 163(b) as if they included interest, this section is ignored for those amounts. (4) Certain patent sales. For a transfer described in section 1235(a) (a sale or exchange of patents), this section does not apply to any amount that depends on how productive, useful, or disposed-of the transferred property turns out to be. (e) Maximum rate of interest on certain land transfers between related parties. (1) In general. For a "qualified sale," the discount rate used to figure total unstated interest under subsection (b) cannot go over 6 percent, compounded twice a year. (2) "Qualified sale" means a sale or exchange of land by an individual to a member of that individual's family, as defined in section 267(c)(4). (3) $500,000 limitation. Paragraph (1)'s rate cap does not apply once the sales prices of all qualified sales between the same two individuals in the same calendar year — added together — exceed $500,000. (4) Nonresident alien individuals. Paragraph (1)'s rate cap does not apply if any party to the sale or exchange is a nonresident alien individual. (f) Regulations. The Secretary must prescribe regulations needed to carry out this section, including rules for: (1) a sale contract where the existence, amount, or due date of a payment cannot be determined at the time of the sale or exchange; or (2) any later change in the existence, amount, or due date of a payment (including interest) under a sale contract. (g) Cross references. (1) For how assumptions are treated, see section 1274(c)(4). (2) For special rules where the stated principal amount does not exceed $2,800,000, see section 1274A. (3) For special rules for borrowers under certain personal-use loans, see section 1275(b).