Before enactment of I.R.C. § 1038 in 1964, repossession of real property following default under an installment sale transaction generally resulted in substantial gain or loss, usually to the extent of the difference between the fair market value of the property at the time of repossession and the income tax basis of the installment obligation. Repossession was essentially treated as a disposition of the obligation.
Harl, Neil E.
Agricultural Law Digest: Vol. 2
, Article 1.
Available at: http://lib.dr.iastate.edu/aglawdigest/vol2/iss15/1