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TITLE 26-INTERNAL REVENUE CODE Any gain or loss so resulting shall be consid- ered as resulting from the sale or exchange of the property in respect of which the install- ment obligation was received. (2) Basis of obligation The basis of an installment obligation shall be the excess of the face value of the obliga- tion over an amount equal to the income which would be returnable were the obliga- tion satisfied in full. (3) Special rule for transmission at death Except as provided in section 691 (relating to recipients of income in respect of dece- dents), this subsection shall not apply to the transmission of installment obligations at death. (4) Effect of distribution in certain liquid&tions (A) Liquidations to which section 332 applies If- (I) an Installment obligation is distribut- ed in a liquidation to which section 332 (relating to complete liquidations of sub- sidiaries) applies, and (ii) the basis of such obligations in the hands of the distributee Is determined under section 334(b)(1), then no gain or loss with respect to the dis- tribution of such obligation shall be recog- nized by the distributing corporation. (B) Liquidations to which section 337 applies. If- (i) an installment obligation is distribut- ed by a corporation in the course of a liq- uidation, and (ii) under section 337 (relating to gain or loss on sales or exchanges in connection with certain liquidations) no gain or loss would have been recognized to the corpo- ration if the corporation had sold or ex- changed such installment obligation on the day of such distribution, then no gain or loss shall be recognized to such corporation by reason of such distribu- tion. The preceding sentence shall not apply to the extent that under paragraph (1) gain to the distributing corporation would be considered as a gain to which sec- tion 341(f), 617(d)(1), 1245(a), 1250(a), 1251(c), 1252(a), or 1254(a) applies. (5) Life insurance companies In the case of a disposition of an install- ment obligation by any person other than a life insurance company (as defined in section 801(a)) to such an insurance company or to a partnership of which such an insurance com- pany is a partner, no provision of this subtitle providing for the nonrecognition of gain shall apply with respect to any gain resulting under paragraph (1). If a corporation which is a life insurance company for the taxable year was (for the preceding taxable year) a corpo- ration which was not a life insurance compa- ny, such corporation shall, for purposes of this paragraph and paragraph (1), be treated as having transferred to a life insurance com- pany, on the last day of the preceding taxable year, all installment obligations which it held on such last day. A partnership of which a life insurance company becomes a partner shall, for purposes of this paragraph and paragraph (1), be treated as having trans- ferred to a life insurance company, on the last day of the preceding taxable year of such partnership, all installment obligations which it holds at the time such insurance company becomes a partner. (e) Carrying charges not included in total contract price If the carrying charges or interest with re- spect to sales of personal property, the income frnm which is returned under subsection (a)(1), is not included in the total contract price, pay. ments received with respect to such sales shall be treated as applying first against such carry- ing charges or interest, This subsection shall not apply with respect to sales or other disposi- tions of property the Income from which is, under subsection (b), returned on the basis and in the manner prescribed in subsection (a)(1). (Aug. 16, 1954, ch. 736, 68A Stat. 154; Sept. 2, 1958, Pub. L. 85-866, title I, § 27(a), 72 Stat. 1624; Oct. 16, 1962, Pub. L. 87-834, § 13(f)(5), 76 Stat. 1035; Feb. 26, 1964, Pub. L. 88-272, title II, §§222(a), 231(b)(5), 78 Stat. 75, 105; Aug. 22, 1964, Pub. L. 88-484, § 1(b)(2), 78 Stat. 597; Aug. 31, 1964, Pub. L. 88-539, § 3(a), (b), 78 Stat. 746; Sept. 12, 1966, Pub. L. 89-570, § 1(b)(5), 80 Stat. 762; Nov. 13, 1966, Pub. L. 89-809, title II, § 202(c), 80 Stat. 1576; Dec. 30, 1969, Pub. L. 91- 172, title II, §211(b)(5), title III, §301(b)(7), title IV, § 412(a), title IX, § 916(a), 83 Stat. 570, 585, 608, 723; Oct. 4, 1976, Pub. L. 94-455, title II, § 205(c)(1)(E), title XIX, §§ 1901(a)(66), 1906(b)(13)(A), 1951(b)(7)(A), 90 Stat. 1535, 1775, 1834, 1838.) AMENDMENTS 1976-Subsecs. (a)(1), (b)(1). Pub. L. 94-455, § 1906(b)(13)(A), struck out "or his delegate" following "Secretary". Subsec. (b)(2). Pub. L. 94-455, § 1951(b)(7)(A), struck out provisions which had placed a general limitation on the use of the installment sales method to sales or other dispositions during taxable years beginning after Dec. 31, 1953, but which had provided that the method could be used In the case of sales or other dis- positions during taxable years beginning before Jan. 1, 1954, if the income was (by reason of section 44(b) of the Internal Reve.nue Code of 1939) returnable on the basis and in the manner prescribed in section 44(a) of the Internal Revenue Code of 1939. Subsec. (c)(3). Pub. L. 94-455, § 1901(a)(66)(A), sub- stituted "corresponding provisions of the Internal Revenue Code of 1954" for "corresponding provisions of the Internal Revenue Code of 1939". Subsecs. (c)(4), (5). Pub. L. 94-455, § 1906(b)(13)(A), struck out "or his delegate" following "Secretary". Subsec. (d)(4)(B). Pub. L. 94-455, §§ 205(c)(1)(E), 1901(a)(66)(B), substituted a comma for "or section" preceding "617(d)(1)" and added reference to section 1254(a) in the provisions following cl. (ii). 1969-Subsec. (b). Pub. L. 91-172, § 412(a), added par. (3). Subsec. (c). Pub. L. 91-172, § 916(a), added pars. (4) and (5). Subsec. (c)(3). Pub. L. 91-172, § 301(b)(7), inserted other than by section 56," after "prior revenue laws)". Subsec. (d)(4)(B). Pub. L. 91-172, § 211(b)(5), substi- tuted "1250(a), 1251(c), or 1252(a)", for "or 1250(a)". 1966-Subsec. (d)(4)(A). Pub. L. 89-809 substituted "distributed in a liquidation to which section 332 (re- lating to complete liquidations of subsidiaries) ap- plies" for "distributed by a corporation in the course of a liquidation" In clause (I) and "the basis of such obligation in the hands of the distributee is deter- § 453 Page 360