---
kind: "range"
citation: "26 C.F.R. §§ 1.483-1–1.483-4"
title: "26"
from: "1.483-1"
to: "1.483-4"
count: 4
url: "https://uscodex.org/cfr/26/1.483-1..1.483-4"
---

# §1.483-1. Interest on certain deferred payments.

- (a) **Amount constituting interest in certain deferred payment transactions—**
  - (1) **In general.** Except as provided in [paragraph (c)](#c) of this section, [section 483](/cfr/26/483.md) applies to a contract for the sale or exchange of property if the contract provides for one or more payments due more than 1 year after the date of the sale or exchange, and the contract does not provide for adequate stated interest. In general, a contract has adequate stated interest if the contract provides for a stated rate of interest that is at least equal to the test rate (determined under [§ 1.483-3](/cfr/26/1.483-3.md)) and the interest is paid or compounded at least annually. [Section 483](/cfr/26/483.md) may apply to a contract whether the contract is express (written or oral) or implied. For purposes of [section 483](/cfr/26/483.md), a sale or exchange is any transaction treated as a sale or exchange for tax purposes. In addition, for purposes of [section 483](/cfr/26/483.md), property includes debt instruments and investment units, but does not include money, services, or the right to use property. For the treatment of certain obligations given in exchange for services or the use of property, see sections [404](/cfr/26/404.md) and [467](/cfr/26/467.md). For purposes of this [paragraph (a)](#a), money includes functional currency and, in certain circumstances, nonfunctional currency. See [§ 1.988-2(b)(2)](/cfr/26/1.988-2.md?p=b-2) for circumstances when nonfunctional currency is treated as money rather than as property.
  - (2) **Treatment of contracts to which section 483 applies—**
    - (i) **Treatment of unstated interest.** If [section 483](/cfr/26/483.md) applies to a contract, unstated interest under the contract is treated as interest for tax purposes. Thus, for example, unstated interest is not treated as part of the amount realized from the sale or exchange of property (in the case of the seller), and is not included in the purchaser's basis in the property acquired in the sale or exchange.
    - (ii) **Method of accounting for interest on contracts subject to section 483.** Any stated or unstated interest on a contract subject to [section 483](/cfr/26/483.md) is taken into account by a taxpayer under the taxpayer's regular method of accounting (e.g., an accrual method or the cash receipts and disbursements method). See §§ [1.446-1](/cfr/26/1.446-1.md), [1.451-1](/cfr/26/1.451-1.md), and [1.461-1](/cfr/26/1.461-1.md). For purposes of the preceding sentence, the amount of interest (including unstated interest) allocable to a payment under a contract to which [section 483](/cfr/26/483.md) applies is determined under [§ 1.446-2(e)](/cfr/26/1.446-2.md?p=e).
- (b) **Definitions—**
  - (1) **Deferred payments.** For purposes of the regulations under [section 483](/cfr/26/483.md), a deferred payment means any payment that constitutes all or a part of the sales price (as defined in [paragraph (b)(2)](#b-2) of this section), and that is due more than 6 months after the date of the sale or exchange. Except as provided in [section 483(c)(2)](/cfr/26/483.md?p=c-2) (relating to the treatment of a debt instrument of the purchaser), a payment may be made in the form of cash, stock or securities, or other property.
  - (2) **Sales price.** For purposes of [section 483](/cfr/26/483.md), the sales price for any sale or exchange is the sum of the amount due under the contract (other than stated interest) and the amount of any liability included in the amount realized from the sale or exchange. See [§ 1.1001-2](/cfr/26/1.1001-2.md). Thus, the sales price for any sale or exchange includes any amount of unstated interest under the contract.
- (c) **Exceptions to and limitations on the application of section 483—**
  - (1) **In general.** Sections [483(d)](/cfr/26/483.md?p=d), [1274(c)(4)](/cfr/26/1274.md?p=c-4), and [1275(b)](/cfr/26/1275.md?p=b) contain exceptions to and limitations on the application of [section 483](/cfr/26/483.md).
  - (2) **Sales price of $3,000 or less.** [Section 483(d)(2)](/cfr/26/483.md?p=d-2) applies only if it can be determined at the time of the sale or exchange that the sales price cannot exceed $3,000, regardless of whether the sales price eventually paid for the property is less than $3,000.
  - (3) **Other exceptions and limitations—**
    - (i) **Certain transfers subject to section 1041.** [Section 483](/cfr/26/483.md) does not apply to any transfer of property subject to [section 1041](/cfr/26/1041.md) (relating to transfers of property between spouses or incident to divorce).
    - (ii) **Treatment of certain obligees.** [Section 483](/cfr/26/483.md) does not apply to an obligee under a contract for the sale or exchange of personal use property (within the meaning of [section 1275(b)(3)](/cfr/26/1275.md?p=b-3)) in the hands of the obligor and that evidences a below-market loan described in [section 7872(c)(1)](/cfr/26/7872.md?p=c-1).
    - (iii) **Transactions involving certain demand loans.** [Section 483](/cfr/26/483.md) does not apply to any payment under a contract that evidences a demand loan that is a below-market loan described in [section 7872(c)(1)](/cfr/26/7872.md?p=c-1).
    - (iv) **Transactions involving certain annuity contracts.** [Section 483](/cfr/26/483.md) does not apply to any payment under an annuity contract described in [section 1275(a)(1)(B)](/cfr/26/1275.md?p=a-1-B) (relating to annuity contracts excluded from the definition of debt instrument).
    - (v) **Options.** [Section 483](/cfr/26/483.md) does not apply to any payment under an option to buy or sell property.
- (d) **Assumptions.** If a debt instrument is assumed, or property is taken subject to a debt instrument, in connection with a sale or exchange of property, the debt instrument is treated for purposes of [section 483](/cfr/26/483.md) in a manner consistent with the rules of [§ 1.1274-5](/cfr/26/1.1274-5.md).
- (e) **Aggregation rule.** For purposes of [section 483](/cfr/26/483.md), all sales or exchanges that are part of the same transaction (or a series of related transactions) are treated as a single sale or exchange, and all contracts calling for deferred payments arising from the same transaction (or a series of related transactions) are treated as a single contract. This rule, however, generally only applies to contracts and to sales or exchanges involving a single buyer and a single seller.
- (f) **Effective date.** This section applies to sales and exchanges that occur on or after April 4, 1994. Taxpayers, however, may rely on this section for sales and exchanges that occur after December 21, 1992, and before April 4, 1994.

# §1.483-2. Unstated interest.

- (a) **In general—**
  - (1) **Adequate stated interest.** For purposes of [section 483](/cfr/26/483.md), a contract has unstated interest if the contract does not provide for adequate stated interest. A contract does not provide for adequate stated interest if the sum of the deferred payments exceeds—
    - (i) The sum of the present values of the deferred payments and the present values of any stated interest payments due under the contract; or
    - (ii) In the case of a cash method debt instrument (within the meaning of [section 1274A(c)(2)](/cfr/26/1274A.md?p=c-2)) received in exchange for property in a potentially abusive situation (as defined in [§ 1.1274-3](/cfr/26/1.1274-3.md)), the fair market value of the property reduced by the fair market value of any consideration other than the debt instrument, and reduced by the sum of all principal payments that are not deferred payments.
  - (2) **Amount of unstated interest.** For purposes of [section 483](/cfr/26/483.md), unstated interest means an amount equal to the excess of the sum of the deferred payments over the amount described in paragraph [(a)(1)(i)](#a-1-i) or [(a)(1)(ii)](#a-1-ii) of this section, whichever is applicable.
- (b) **Operational rules—**
  - (1) **In general.** For purposes of [paragraph (a)](#a) of this section, rules similar to those in [§ 1.1274-2](/cfr/26/1.1274-2.md) apply to determine whether a contract has adequate stated interest and the amount of unstated interest, if any, on the contract.
  - (2) **Present value.** For purposes of [paragraph (a)](#a) of this section, the present value of any deferred payment or interest payment is determined by discounting the payment from the date it becomes due to the date of the sale or exchange at the test rate of interest applicable to the contract in accordance with [§ 1.483-3](/cfr/26/1.483-3.md).
- (c) **Examples.** The following examples illustrate the rules of this section.
- (d) **Effective date.** This section applies to sales and exchanges that occur on or after April 4, 1994. Taxpayers, however, may rely on this section for sales and exchanges that occur after December 21, 1992, and before April 4, 1994.

# §1.483-3. Test rate of interest applicable to a contract.

- (a) **General rule.** For purposes of [section 483](/cfr/26/483.md), the test rate of interest for a contract is the same as the test rate that would apply under [§ 1.1274-4](/cfr/26/1.1274-4.md) if the contract were a debt instrument. [Paragraph (b)](#b) of this section, however, provides for a lower test rate in the case of certain sales or exchanges of land between related individuals.
- (b) **Lower rate for certain sales or exchanges of land between related individuals—**
  - (1) **Test rate.** In the case of a qualified sale or exchange of land between related individuals (described in [section 483(e)](/cfr/26/483.md?p=e)), the test rate is not greater than 6 percent, compounded semiannually, or an equivalent rate based on an appropriate compounding period.
  - (2) **Special rules.** The following rules and definitions apply in determining whether a sale or exchange is a qualified sale under [section 483(e)](/cfr/26/483.md?p=e):
    - (i) **Definition of family members.** The members of an individual's family are determined as of the date of the sale or exchange. The members of an individual's family include those individuals described in [section 267(c)(4)](/cfr/26/267.md?p=c-4) and the spouses of those individuals. In addition, for purposes of [section 267(c)(4)](/cfr/26/267.md?p=c-4), full effect is given to a legal adoption, ancestor means parents and grandparents, and lineal descendants means children and grandchildren.
    - (ii) **$500,000 limitation.** [Section 483(e)](/cfr/26/483.md?p=e) does not apply to the extent that the stated principal amount of the debt instrument issued in the sale or exchange, when added to the aggregate stated principal amount of any other debt instruments to which [section 483(e)](/cfr/26/483.md?p=e) applies that were issued in prior qualified sales between the same two individuals during the same calendar year, exceeds $500,000. See Example 3 of [paragraph (b)(3)](#b-3) of this section.
    - (iii) **Other limitations.** [Section 483(e)](/cfr/26/483.md?p=e) does not apply if the parties to a contract include persons other than the related individuals and the parties enter into the contract with an intent to circumvent the purposes of [section 483(e)](/cfr/26/483.md?p=e). In addition, if the property sold or exchanged includes any property other than land, [section 483(e)](/cfr/26/483.md?p=e) applies only to the extent that the stated principal amount of the debt instrument issued in the sale or exchange is attributable to the land (based on the relative fair market values of the land and the other property).
  - (3) **Examples.** The following examples illustrate the rules of this [paragraph (b)](#b).
- (c) **Effective date.** This section applies to sales and exchanges that occur on or after April 4, 1994. Taxpayers, however, may rely on this section for sales and exchanges that occur after December 21, 1992, and before April 4, 1994.

# §1.483-4. Contingent payments.

- (a) **In general.** This section applies to a contract for the sale or exchange of property (the overall contract) if the contract provides for one or more contingent payments and the contract is subject to [section 483](/cfr/26/483.md). This section applies even if the contract provides for adequate stated interest under [§ 1.483-2](/cfr/26/1.483-2.md). If this section applies to a contract, interest under the contract is generally computed and accounted for using rules similar to those that would apply if the contract were a debt instrument subject to [§ 1.1275-4(c)](/cfr/26/1.1275-4.md?p=c). Consequently, all noncontingent payments under the overall contract are treated as if made under a separate contract, and interest accruals on this separate contract are computed under rules similar to those contained in [§ 1.1275-4(c)(3)](/cfr/26/1.1275-4.md?p=c-3). Each contingent payment under the overall contract is characterized as principal and interest under rules similar to those contained in [§ 1.1275-4(c)(4)](/cfr/26/1.1275-4.md?p=c-4). However, any interest, or amount treated as interest, on a contract subject to this section is taken into account by a taxpayer under the taxpayer's regular method of accounting (e.g., an accrual method or the cash receipts and disbursements method).
- (b) **Examples.** The following examples illustrate the provisions of [paragraph (a)](#a) of this section:
- (c) **Effective date.** This section applies to sales and exchanges that occur on or after August 13, 1996.