If you sell property, such as a vacation home, or rental property, and the buyer will pay over a period of years, you report the gain as you receive the money, not all in the year of sale. This method of reporting gain is called the installment method. You can't use the installment method for sales of publicly traded stocks and bonds. You can elect to report the entire gain in the year of sale, but it is rarely advantageous to do so. You should consider making this election if you have a large amount of capital losses for the year of sale or if you have a large capital loss carryover to the year of sale.
Caution: If you fail to include adequate interest in the contract, the IRS will recharacterize part of your gain as interest income. The lowest interest rate you can use is generally the lowest of the applicable federal rate for the month in which you sell the property, or either of the two preceding months.
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