The contract price in an installment sale, for tax purposes, is generally defined as the selling price less the existing mortgages assumed by the buyer. This definition is crucial for correctly determining the taxable portion of payments received from the sale.
In the context of installment sales, the Gross Profit Ratio is the proportion of gross profit (gain) to the contract price, used to determine the taxable gain from periodic receipts from the buyer.
An installment sale is a sales arrangement where the buyer agrees to make payments over time rather than paying the full amount upfront. This type of sale is commonly used in real estate transactions and for higher-priced goods or services.
