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Installment Method Opt-Out Revoked in New IRS Ruling

By Sean Whitehead, Structured Settlement Consultant & Content Contributor · October 28, 2026

What happened

In a private letter ruling released June 5, 2026 (PLR 202623014), the IRS let a married couple undo an election out of the installment method that they made by mistake.

The couple sold substantially all the assets of their business, partly for cash and partly for an installment note from the buyers. Their tax preparers never discussed how to report the note. When the couple filed their return for the year of the sale, they didn't realize it elected out of the installment method, which meant the gain on the note was taxed in that year instead of as payments came in. A new preparer later caught the issue.

Why the IRS said yes

An election out can be revoked only with IRS consent. The IRS won't agree if one purpose is to avoid tax, or if the tax year in which any payment was received is closed. Here, the IRS found that:

• The election was inadvertent.
• The couple didn't use hindsight, and avoiding tax wasn't a motive.
• The relevant tax years were still open.

The couple had 75 days from the date of the letter to file amended returns, with a copy of the ruling attached.

Why it matters

A seller who takes a note can lose installment treatment through a reporting choice they didn't realize they made. Relief is possible, but it takes a ruling request and a clean set of facts. A private letter ruling applies only to the taxpayer who asked for it and can't be cited as precedent.

Takeaways for sellers

• Before you file: Ask your preparer how a seller note will be reported for the year of the sale.
• On your draft return: Check it for an election out that you didn't intend.
• If you find a mistake: Raise it quickly. Relief depends on the tax years still being open and on there being no tax-avoidance motive.

Sources: Bloomberg Tax, June 8, 2026 · IRS, PLR 202623014 (PDF)

This article is general information, not tax or legal advice. Talk with a CPA or tax attorney about your situation.