Wraparound Mortgage

[Corduroy Frog]

A client sold his interest in a partnership and will collect the proceeds over a 10-year period (Installment method).  There was a loan attached to the partnership interest.

The buyer in effect took over the loan.  Technically it doesn't meet the definition of a "wraparound" mortgage because he had to secure his own loan so he could pay off the loan attached to the partnership interest.

There is no question that the loan payoff becomes part of the revenue associated with the installment sale.  However the timing is up for discussion.

Question:  When reporting on the installment method, must he show the mortgage payoff as collected revenue in the first year?  My guess is that he must, because that's when he received the benefit.

Incidentally, this client is the same one mentioned in my previous post.  He was partner in two partnerships, sold one at a loss and another at a gain, both instalments.