Repossession

Repossession means:
the act by which a seller takes back property sold by the installment method for which payments have not been made according to contract.

Personal Property. Repossession of personal property sold by the installment method is treated as a disposition of the installment obligation. The difference between the fair market value of the returned property and the basis of the installment obligation to the seller is the seller's gain or loss. The basis of the obligation in the hands of the seller is its face value minus the remaining deferred gross profit on the sale (at the date of repossession). The gain or loss on repossession will be a capital gain or capital loss if the original gain or loss was a capital one.

Real Property. Repossession of real property sold by the installment method results in gain only to the lesser of:

1. the total money and the fair market value of other property received before repossession, minus the gain from the original sale reported as income before the repossession, or.

2. the gain on the original sale minus the income reported before the repossession and minus any costs of repossession.

The seller's basis in the repossessed real property is the adjusted basis of the debt at repossession plus any gain recognized from the repossession and any costs of repossession.

See also other Tax Terms and Definitions in U.S.A.

foreclosure.

See also Capital Gain in the American Legal Encyclopedia and Capital Gain in the World Legal Encyclopedia.