What is a related party?

A related party includes any of the following:

• Your spouse
• Your child
• Your grandchild
• Your parent
• Your brother or sister
• A related corporation, S corporation, partnership, estate, or trust

If you sell depreciable property to a related party, you usually can't use the installment method to report the sale. However, if you can demonstrate to the IRS that tax avoidance wasn't one of the main reasons for the installment sale (for example, no major tax deferral benefits will result from the sale), you may be able to use the installment method.

See IRS Publication 537 for more details.