Contract Price

Contract Price

Contract Price means, in an installment sale; for tax purposes, generally the selling price less existing mortgages assumed by the buyer.

Example of Contract Price:

Learn more about tax examples, explanations and calculations here.

Donald sells land for $100,000 subject to an existing $60,000 first mortgage. He receives $5,000 cash in the year of sale and a $35,000 second mortgage from the buyer. The contract price is $40,000. Note that, if Donald's first mortgage exceeds the basis of the land, such excess is a payment in the year of sale and reduces the contract price.


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