Extract to table

Legal Framework — Overview of Reporting Methods for Contingent Consideration When a sale of property involves contingent consideration — such as an earnout — the seller must determine the appropriate method for reporting gain or loss

Section 453 — Installment Method Section 453 of the Code provides that, as a general rule, income from an installment sale shall be reported under the "installment method

Additionally, Section 453(i) requires that any gain attributable to "recapture income" — including ordinary income recognized under Section 1245, Section 1250, or Section 751(a) — must be recognized in full in the year of the disposition, notwithstanding the installment method

Each seller's adjusted outside basis in their Pinnacle membership interests must be determined as of the closing date

40M; however, the actual allocation between cash-out and rollover must be determined based on relative fair market values and the specific facts of the rollover

To the extent any gain is recharacterized as ordinary income under Section 751(a), such ordinary income cannot be deferred under the installment method and must be recognized in the year of sale (2024) pursuant to Section 453(i)