conditional sales contract

Conditional Sales Contracts

A sale of an asset in which the buyer assumes possession and may have use of the asset, but the seller retains title until the buyer pays its full price and may repossess the asset if the buyer does not. In exchange for the right to use the asset, the buyer makes payments over an agreed-upon period of time, whether months or years. This arrangement is most common with heavy equipment, machinery, and real estate. See also: Beneficial ownership, Lease.

conditional sales contract

(1) A sales contract in which the buyer is given possession and use of the item sold,but the seller retains legal title until all payments have been made in full.Equipment leases for a term of years,at the end of which the buyer pays $1 to buy the property, have been characterized by the IRS as conditional sales contracts rather than true leases.As a result,the taxpayer is not allowed to deduct the full lease payments each year,but only an amount equal to the depreciation available if the property had been purchased for cash, plus an allocation for interest. This amount is usually less than the annual lease payment. (2) If pertaining to real estate, commonly called a bond for title,land sale contract, or contract for deed.