## Facts

- Mose and Rose Silverman owned 29,162 shares of Olympic Savings and Loan Association stock in 1982.
- Coast Federal Savings and Loan Association offered to acquire all Olympic shares in exchange for Coast savings accounts valued at $28.5487 per share.
- The exchange consideration was split into two accounts:
  - 30% in a withdrawable statement savings account paying 5.5% interest (compounded daily).
  - 70% in a non-withdrawable, fixed-rate six-year statement savings account paying 6.5% interest (payable semiannually); principal could not be withdrawn for six years.
- The six-year account was nontransferable and could not be assigned, sold, or pledged, except it could pass to a personal representative at the owner’s death.
- Upon acceptance, the Silvermans received $249,761 in the withdrawable account and $582,776 in the six-year non-withdrawable account; both accounts were funded in 1982 and began earning interest immediately.
- On their 1982 return, the Silvermans reported income attributable to the 30% withdrawable account but did not report the principal placed in the six-year account, claiming installment-method treatment under I.R.C. § 453 until funds became accessible.
- The Commissioner determined that the entire exchange value was payment received in 1982 and assessed a $98,196 income tax deficiency for 1982.
- Mose Silverman died in January 1983; the estate, through the executrix, challenged the deficiency in the Tax Court.

## Issues

1. Whether the six-year non-withdrawable savings account constituted a “payment” received in 1982 for purposes of the installment method under I.R.C. § 453.
2. Whether withdrawal and transfer restrictions on a fully funded time-deposit-type account defer recognition of gain from an exchange of stock.

## Decision

- The Tax Court held for the Commissioner.
- The court ruled that petitioners were not entitled to report the transaction under the installment method.
- The court held that the full value of the consideration, including the six-year non-withdrawable account, was payment received in 1982.
- The deficiency determination was sustained because the gain was fully taxable in 1982.

## Legal Principles

- For I.R.C. § 453, “payment” includes property of determinable value received in the year of sale, not only cash.
- A fully funded, interest-bearing deposit obligation from a financially sound institution constitutes current payment, even if the principal is subject to time-based withdrawal limits.
- Restrictions on liquidity or transferability generally limit use, not receipt or ownership, and do not by themselves convert funded consideration into deferred installment payments.
- Installment reporting is unavailable where the seller has no remaining claim for unpaid purchase price after the closing and the buyer’s obligation is satisfied by funded accounts created at the time of the exchange.

## Conclusion

The Tax Court concluded that receiving fully funded savings accounts equal to the full exchange price—though one account was non-withdrawable and nontransferable for six years—constituted payment in full in the year of exchange, so the gain could not be deferred under I.R.C. § 453.


Estate of Silverman v. Commissioner, 98 T.C. 54 (1992)