When you hold an installment note be careful of tax traps. Should an install-ment obligation be used to secure a loan made to the taxpayer, the loan amount is considered to have been a payment on the installment note, accelerating gain recognition to the taxpayer. Another trap for the unwary is the balloon date when the installment obligation becomes due. If the due date is extended before the date of the balloon the taxpayer continues to report the payments as they are received.
