Open transaction reporting method:
a. Judicially created
b. May apply to either cash or accrual method taxpayers, except when the consideration received has no readily ascertainable FMV.
i. example: contracts and claims to receive indefinite amounts of income such as a percentage of future earnings
c. when open transaction reporting applies , the transaction is held “open” until the taxpayer first recovers their basis in the property sold and then reports income when and if receipts exceed the B in the property sold and then reports income when and if receipts exceed the basis in the property transferred. T/f open transaction reporting permits the deferral of income until basis has been completely recovered. In contrast, installment method reporting permits the deferral of income and the pro rata recovery of basis as payments are received.
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