Internal Revenue Service
Revenue Ruling

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 Rev. Rul. 55-5

1955-1 C.B. 331

Sec. 453

Full Text

Rev. Rul. 55-5

Real property was sold to the Y Corporation on the installment basis under a land contract with the balance to be paid over a number of years. The contract provided that upon payment of 50 percent of the purchase price and at the option of Y Corporation, a warranty deed of the premises would be delivered to Y Corporation in consideration of a promissory note secured by a real estate mortgage, for the balance of the purchase price, with installment payments to be made as set forth in the original contract of sale of said premises. The Y Corporation has complied with the terms of the original contract and a mortgage contract has been substituted for the land contract, containing the same terms and conditions for payment of the balance due as set forth in the land contract. Held , the substitution of the mortgage contract, in an amount equal to the unpaid balance of the purchase price, payable on the same terms and conditions of payment of the balance under the land contract, results in a change in the type of security only and does not constitute a satisfaction or disposition of an installment obligation giving rise to gain or loss under section 44(d) of the Internal Revenue Code of 1939