Revenue Ruling 22-88-3
Individual Income Tax

This guidance document is advisory in nature but is binding on the Nebraska Department of Revenue (Department) until amended. A guidance document does not include internal procedural documents that only affect the internal operations of the Department and does not impose additional requirements or penalties on regulated parties or include confidential information or rules and regulations made in accordance with the Administrative Procedure Act. If you believe that this guidance document imposes additional requirements or penalties on regulated parties, you may request a review of the document.

This guidance document may change with updated information or added examples. The Department recommends you do not print this document. Instead, sign up for the subscription service at revenue.nebraska.gov to get updates on your topics of interest.

Individual Income Tax—Income from Installment Sales. THE AMOUNT DETERMINED AS THE PROPORTIONATE DISALLOWANCE OF INCOME DEFERRED UNDER THE INSTALLMENT SALES METHOD OF ACCOUNTING IS DEEMED A PAYMENT RECEIVED AND INCLUDED IN FEDERAL ADJUSTED CROSS INCOME UNDER THE INTERNAL. REVENUE CODE, AND IS FULLY TAXABLE IN NEBRASKA IN THE YEAR IT IS DISALLOWED.

Advice has been requested as to whether a taxpayer who has been using the installment method of accounting may defer a portion of the tax due to Nebraska on the income from the proportionate disallowance that is deemed a payment under section 453C of the Internal Revenue Code of 1986.

The IRC deems that a portion of the income deferred under the installment method of accounting is a payment received at the end of the taxable year under the proportionate disallowance rule. The income on the deemed payment is recognized and is properly included in federal adjusted gross income, which is the base for the Nebraska individual income tax.

The federal transition rules allow the increase in the federal tax due to the proportionate disallowance to be paid in more than one year. There is no similar provision in Nebraska law allowing a delay in the payment of the tax. The entire amount of the Nebraska individual income tax on the amount of the proportionate disallowance is due with the return for the year for which the disallowance was computed.

 

APPROVED:

John Boehm
State Tax Commissioner

May 24, 1988