Section 453A Interest

Definition

Section 453A of the Internal Revenue Code imposes a special interest charge on deferred tax liability arising from large installment sale obligations, generally where the face amount of all outstanding installment obligations exceeds $5 million at year-end. The interest charge is calculated as if the deferred tax on the outstanding balance were a loan from the government, effectively reducing the benefit of long-term installment deferral for high-value transactions. CPAs must compute and report this charge annually for affected clients on Form 6252 supporting calculations.