Inherited installment obligation.

In pub 537 it says that if you inherit an installment obligation it is taxed the same as it was for the seller. However; when you inherit property, the basis of the inherited property is the FMV on the date you inherit the property. The FMV of an installment obligation will the sum of the principal plus the gross profit to the decedent. Thus it seems to me that the gross profit percent, to the beneficiary, should be zero because of the stepped up basis. What am I missing?

Reply to
ssd
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You recognize all income after that date.

Reply to
D. Stussy

You are missing the exception in the Internal Revenue Code that treats a disposition of an installment sales contract after death differently than other dispositions of assets. Heirs must use the same gross profit ratio used by the decedent on the installment payments.

Reply to
Alan

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