1.    if encumbered property is sold on the installment method and the purchaser assumes or takes the property subject to the debt, application of general mechanics of 453 does not result in taxation of all the sellers inherent gain (see page 381 for example); t/f the Regs (1.453-4(c) & Temp Reg 15.453-1(b)(3)) prevent this potential underreporting of gain through two adjustments:
1.    one to the contract price and
2.    one to year of sale payments, based on the relationship b/w the seller’s A/B and the mortgage
b.    two situations may occur:
1.    the debt assumed does not exceed the A/B, or
a.    in this situation, one adjustment is necessary; the total K price is reduced by the amount of the qualifying indebtedness assumed
2.    the debt assumed exceeds the A/B
a.    in this situation, where the debt relief exceeds the A/B, two adjustments are required:
i.    the total contract prices is reduced by the amount of the qualifying indebtedness not in excess of the A/B; &
ii.    qualifying indebtedness exceeding the A/b is treated as a constructive payment in the year of sale
b.    15A.453-1(b)(2)(iv): defines “qualifying indebtedness” as a mortgage or other indebtedness encumbering the disposed property and other indebtedness not secured by the property but incurred or assumed by the purchaser incident to the purchaser’s acquisition or operation of the property in the ordinary course of business or investment; excluded from the definition of qualifying indebtedness are any obligations of the seller functionally unrelated to the acquisition, holding, or operation of the property (e.g. the taxpayer’s medical bill) and any obligations related to the disposition of the property (e.g. the legal fees).