CONTINGENT PAYMENT SALE

A type of installment sale in which either the price or payment period for the asset has not been fixed. Contingent payment sales entail a special set of rules that vary according to whether the price or the schedule is the fixed amount. For example, if you sell your business and part of the price includes a share of future revenues or profits, this would be a contingent payment sale.

Because the final amounts in these transactions are uncertain, it is difficult to calculate tax liability for any capital gains. The methods for calculating tax liability for contingent payment sales transactions include determining a maximum selling price or, alternatively, determining a fixed period during which payments will be made by the buyer to the seller.