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TITLE 26-INTERNAL REVENUE CODE (3) Purchaser evidences of indebtedness payable on demand or readily tradable. In applying this subsection, a bond or other evidence of indebtedness which is payable on demand, or which is issued by a corporation or a government or political subdivision thereof (A) with Interest coupons attached or in registered form (other than one In regis- tered form which the taxpayer establishes will not be readily tradable in an established securities market), or (B) in any other form designed to render such bond or other evi- dence of indebtedness readily tradable in an established securities market, shall not be treated as an evidence of indebtedness of the purchaser. (c) Change from accrual to installment basis (1) General rule If a taxpayer entitled to the benefits of sub- section (a) elects for any taxable year to report his taxable income on the installment basis, then in computing his taxable income for such year (referred to in this subsection as "year of change") or for any subsequent year- (A) installment payments actually re- ceived during any such year on account of sales or other dispositions of property made in any taxable year before the year of change shall not be excluded; but (B) the tax imposed by this chapter for any taxable year (referred to Ln this subsec- tion as "adjustment year") beginning after December 31, 1953, shall be reduced by the adjustment computed under paragraph (2). (2) Adjustment in tax for amounts previously taxed In determining the adjustment referred to in paragraph (1)(B), first determine, for each taxable year before the year of change, the amount which equals the lesser of- (A) the portion of the tax for such prior taxable year which is attributable to the gross profit which was included in gross income for such prior taxable year, and which by reason of paragraph (1)(A) is in- cludible in gross income for the taxable year, or (B) the portion of the tax for the adjust- ment year which is attributable to the gross profit described in subparagraph (A). The adjustment referred to in paragraph (1)(B) for the adjustment year is the sum of the amounts determined under the preceding sentence. (3) Rule for applying paragraph (2) For purposes of paragraph (2), the portion of the tax for a prior taxable year, or for the adjustment year, which is attributable to the gross profit described in such paragraph is that amount which bears the same ratio to the tax imposed by this chapter (or by the corresponding provisions of prior revenue laws); other than by section 56, for such tax- able year (computed without regard to para- graph (2)) as the gross profit described in such paragraph bears to the gross income for such taxable year. For purposes of the pre- ceding sentence, the provisions of chapter 1 (other than of subchapter D, relating to excess profits tax, and of subchapter E, relat- ing to self-employment income) of -he Inter- nal Revenue Code of 1939 shall be' treated as the corresponding provisions of the Internal Revenue Code of 1954. (4) Revocation of election An election under paragraph (1) to report taxable income on the installment basis may be revoked by filing a notice of revocation, in such manner as the Secretary prescribes by regulations, at any time before the expiration of 3 years following the date of the filing of the tax return for the year of change. If such notice of revocation is timely filed- (A) the provisions of paragraph (1) and subsection (a) shall not apply to the year of change or for any subsequent year; (B) the statutory period for the assess- ment of any deficiency for any taxable year ending before the filing of such notice, which Is attributable to the revocation of the election to use the installment basis, shall not expire before the expiration of 2 years from the date of the filing of such notice, and such deficiency may be assessed before the expiration of such 2-year period notwithstanding the provisions of any law or rule of law which would otherwise pre- vent such assessment; and (C) if refund or credit of any overpay- ment, resulting from the revocation of the election to use the installment basis, for any taxable year ending before the date of the filing of the notice of revocation is pre- vented on the date of such filing, or within one year from such date, by the operation of any law or rule of law (other thin section 7121 or 7122), refund or credit of such over- payment may nevertheless be made or al- lowed if claim therefor is filed within one year from such date. No interest shall be al- lowed on the refund or credit of such over- payment for any period prior to the date of the filing of the notice of revocation. (5) Election after revocation If the taxpayer revokes under paragraph (4) an election under paragraph (1) to report taxable income on the installment basis, no election under paragraph (1) may be made, except with the consent of the Secretary, for any subsequent taxable year before the fifth taxable year following the year of change with respect to which such revocation is made. (d) Gain or loss on disposition of installment obliga- tions (1) General rule If an installment obligation is satisfied at other than its face value or distributed, trans- mitted, sold, or otherwise disposed of, gain or loss shall result to the extent of the differ- ence between the basis of the obligation and- (A) the amount realized, in the case of satisfaction at other than face value or a sale or exchange, or (B) the fair market value of the obligation at the time of distribution, transmission, or disposition, in the case of the distribution, transmission, or disposition otherwise than by sale or exchange. Page 359 § 453