Table of Contents
- What Is an Installment Sale?
- General Rules
- Other Rules
- Electing Out of the Installment Method
- Payments Received or Considered Received
- Escrow Account
- Depreciation Recapture Income
- Sale to a Related Person
- Like-Kind Exchange
- Contingent Payment Sale
- Single Sale of Several Assets
- Sale of a Business
- Unstated Interest and Original Issue Discount (OID)
- Disposition of an Installment Obligation
- Repossession
- Interest on Deferred Tax
- Reporting an Installment Sale
- How To Get Tax Help
An installment sale is a sale of property where you receive at least one payment after the tax year of the sale.
If a sale qualifies as an installment sale, the gain must be reported under the installment method unless you elect out of using the installment method.
See Electing Out of the Installment Method under Other Rules, later, for information on recognizing the entire gain in the year of sale.
You can use the following discussions or Form 6252 to help you determine gross profit, contract price, gross profit percentage, and installment sale income.
Each payment on an installment sale usually consists of the following three parts.
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Interest income.
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Return of your adjusted basis in the property.
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Gain on the sale.
In each year you receive a payment, you must include in income both the interest part and the part that is your gain on the sale. You do not include in income the part that is the return of your basis in the property. Basis is the amount of your investment in the property for installment sale purposes.
You must report interest as ordinary income. Interest is generally not included in a down payment. However, you may have to treat part of each later payment as interest, even if it is not called interest in your agreement with the buyer. Interest provided in the agreement is called stated interest. If the agreement does not provide for enough stated interest, there may be unstated interest or original issue discount. See Unstated Interest and Original Issue Discount (OID), under Other Rules, later.
After you have determined how much of each payment to treat as interest, you treat the rest of each payment as if it were made up of two parts.
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A tax-free return of your adjusted basis in the property, and
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Your gain (referred to as installment sale income on Form 6252).
Worksheet A. Figuring Adjusted Basis and Gross Profit Percentage
1. | Enter the selling price for the property | ||
2. | Enter your adjusted basis for the property | ||
3. | Enter your selling expenses | ||
4. | Enter any depreciation recapture | ||
5. | Add lines 2, 3, and 4. This is your adjusted basis for installment sale purposes |
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6. | Subtract line 5 from line 1. If zero or less, enter -0-. This is your gross profit |
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If the amount entered on line 6 is zero, Stop here. You cannot use the installment method. | |||
7. | Enter the contract price for the property | ||
8. | Divide line 6 by line 7. This is your gross profit percentage |
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Any money you are to receive,
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The fair market value (FMV) of any property you are to receive (FMV is discussed at Property Used As a Payment under Other Rules, later),
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Any existing mortgage or other debt the buyer pays, assumes, or takes (a note, mortgage, or any other liability, such as a lien, accrued interest, or taxes you owe on the property), and
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Any of your selling expenses the buyer pays.
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Adjusted basis.
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Selling expenses.
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Depreciation recapture.
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The selling price, minus
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The mortgages, debts, and other liabilities assumed or taken by the buyer, plus
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The amount by which the mortgages, debts, and other liabilities assumed or taken by the buyer exceed your adjusted basis for installment sale purposes.
Example.
You sell property at a contract price of $6,000 and your gross profit is $1,500. Your gross profit percentage is 25% ($1,500 ÷ $6,000). After subtracting interest, you report 25% of each payment, including the down payment, as installment sale income from the sale for the tax year you receive the payment. The remainder (balance) of each payment is the tax-free return of your adjusted basis.
If the selling price is reduced at a later date, the gross profit on the sale also will change. You then must refigure the gross profit percentage for the remaining payments. Refigure your gross profit using Worksheet B, New Gross Profit Percentage — Selling Price Reduced. You will spread any remaining gain over future installments.
Worksheet B. New Gross Profit Percentage — Selling Price Reduced
1. | Enter the reduced selling price for the property |
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2. | Enter your adjusted basis for the property |
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3. | Enter your selling expenses |
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4. | Enter any depreciation recapture |
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5. | Add lines 2, 3, and 4. | ||
6. | Subtract line 5 from line 1. This is your adjusted gross profit |
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7. | Enter any installment sale income reported in prior year(s) |
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8. | Subtract line 7 from line 6 | ||
9. | Future installments | ||
10. | Divide line 8 by line 9. This is your new gross profit percentage* . |
* Apply this percentage to all future payments to determine how much of each of those payments is installment sale income. |
Example.
In 2006, you sold land with a basis of $40,000 for $100,000. Your gross profit was $60,000. You received a $20,000 down payment and the buyer's note for $80,000. The note provides for four annual payments of $20,000 each, plus 8% interest, beginning in 2007. Your gross profit percentage is 60%. You reported a gain of $12,000 on each payment received in 2006 and 2007.
In 2008, you and the buyer agreed to reduce the purchase price to $85,000 and payments during 2008, 2009, and 2010 are reduced to $15,000 for each year.
The new gross profit percentage, 46.67%, is figured in Worksheet B.
You will report a gain of $7,000 (46.67% of $15,000) on each of the $15,000 installments due in 2008, 2009, and 2010.
Example — Worksheet B. New Gross Profit Percentage — Selling Price Reduced
1. | Enter the reduced selling price for the property |
85,000 | |
2. | Enter your adjusted basis for the property |
40,000 | |
3. | Enter your selling expenses |
-0- | |
4. | Enter any depreciation recapture |
-0- | |
5. | Add lines 2, 3, and 4. | 40,000 | |
6. | Subtract line 5 from line 1. This is your adjusted gross profit |
45,000 | |
7. | Enter any installment sale income reported in prior year(s) |
24,000 | |
8. | Subtract line 7 from line 6 | 21,000 | |
9. | Future installments | 45,000 | |
10. | Divide line 8 by line 9. This is your new gross profit percentage* . |
46.67% |
* Apply this percentage to all future payments to determine how much of each of those payments is installment sale income. |
Generally, you will use Form 6252 to report installment sale income from casual sales of real or personal property during the tax year. You also will have to report the installment sale income on Schedule D (Form 1040) or Form 4797, or both. See Schedule D (Form 1040) and Form 4797, later. If the property was your main home, you may be able to exclude part or all of the gain. See Sale of Your Home, later.
Use Form 6252 to report an installment sale in the year it takes place and to report payments received, or considered received because of related party resales, in later years. Attach it to your tax return for each year.
Form 6252 will help you determine the gross profit, contract price, gross profit percentage, and installment sale income.
Enter the gain figured on Form 6252 (line 26) for personal-use property (capital assets) on Schedule D (Form 1040), Capital Gains and Losses, as a short-term gain (line 4) or long-term gain (line 11). If your gain from the installment sale qualifies for long-term capital gain treatment in the year of sale, it will continue to qualify in later tax years. Your gain is long-term if you owned the property for more than 1 year when you sold it.
An installment sale of property used in your business or that earns rent or royalty income may result in a capital gain, an ordinary gain, or both. All or part of any gain from the disposition of the property may be ordinary gain from depreciation recapture. For trade or business property held for more than 1 year, enter the amount from line 26 of Form 6252 on Form 4797, line 4. If the property was held 1 year or less or you have an ordinary gain from the sale of a noncapital asset (even if the holding period is more than 1 year), enter this amount on Form 4797, line 10, and write “From Form 6252.”
If you sell your home, you may be able to exclude all or part of the gain on the sale. See Publication 523, for information about excluding the gain. If the sale is an installment sale, any gain you exclude is not included in gross profit when figuring your gross profit percentage.
The rules discussed in this part of the publication apply only in certain circumstances or to certain types of property. The following topics are discussed.
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Electing out of the installment method.
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Payments received or considered received.
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Escrow account.
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Depreciation recapture income.
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Sale to a related person.
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Like-kind exchange.
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Contingent payment sale.
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Single sale of several assets.
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Sale of a business.
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Unstated interest and original issue discount.
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Disposition of an installment obligation.
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Repossession.
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Interest on deferred tax.
If you elect not to use the installment method, you generally report the entire gain in the year of sale, even though you do not receive all the sale proceeds in that year.
To figure the amount of gain to report, use the fair market value (FMV) of the buyer's installment obligation that represents the buyer's debt to you. Notes, mortgages, and land contracts are examples of obligations that are included at FMV.
You must figure the FMV of the buyer's installment obligation, whether or not you would actually be able to sell it. If you use the cash method of accounting, the FMV of the obligation will never be considered to be less than the FMV of the property sold (minus any other consideration received).
Example.
You sold a parcel of land for $50,000. You received a $10,000 down payment and will receive the balance over the next 10 years at $4,000 a year, plus 8% interest. The buyer gave you a note for $40,000. The note had an FMV of $40,000. You paid a commission of 6%, or $3,000, to a broker for negotiating the sale. The land cost $25,000 and you owned it for more than one year. You decide to elect out of the installment method and report the entire gain in the year of sale.
Gain realized: | |||
Selling price | $50,000 | ||
Minus: | Property's adj. basis | $25,000 | |
Commission | 3,000 | 28,000 | |
Gain realized | $22,000 | ||
Gain recognized in year of sale: | |||
Cash | $10,000 | ||
Market value of note | 40,000 | ||
Total realized in year of sale | $50,000 | ||
Minus: | Property's adj. basis | $25,000 | |
Commission | 3,000 | 28,000 | |
Gain recognized | $22,000 |
The recognized gain of $22,000 is long-term capital gain. You include the entire gain in income in the year of sale, so you do not include in income any principal payments you receive in later tax years. The interest on the note is ordinary income and is reported as interest income each year.
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One of the purposes is to avoid federal income tax.
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The tax year in which any payment was received has closed.
You must figure your gain each year on the payments you receive, or are treated as receiving, from an installment sale.
In certain situations, you are considered to have received a payment, even though the buyer does not pay you directly. These situations occur when the buyer assumes or pays any of your debts, such as a loan, or pays any of your expenses, such as a sales commission. However, as discussed later, the buyer's assumption of your debt is treated as a recovery of your basis rather than as a payment in many cases.
If the buyer pays any of your expenses related to the sale of your property, it is considered a payment to you in the year of sale. Include these expenses in the selling and contract prices when figuring the gross profit percentage.
If the buyer assumes or pays off your mortgage, or otherwise takes the property subject to the mortgage, the following rules apply.
Example.
You sell property with an adjusted basis of $19,000. You have selling expenses of $1,000. The buyer assumes your existing mortgage of $15,000 and agrees to pay you $10,000 (a cash down payment of $2,000 and $2,000 (plus 12% interest) in each of the next 4 years).
The selling price is $25,000 ($15,000 + $10,000). Your gross profit is $5,000 ($25,000 − $20,000 installment sale basis). The contract price is $10,000 ($25,000 − $15,000 mortgage). Your gross profit percentage is 50% ($5,000 ÷ $10,000). You report half of each $2,000 payment received as gain from the sale. You also report all interest you receive as ordinary income.
Example.
The selling price for your property is $9,000. The buyer will pay you $1,000 annually (plus 8% interest) over the next 3 years and assume an existing mortgage of $6,000. Your adjusted basis in the property is $4,400. You have selling expenses of $600, for a total installment sale basis of $5,000. The part of the mortgage that is more than your installment sale basis is $1,000 ($6,000 − $5,000). This amount is included in the contract price and treated as a payment received in the year of sale. The contract price is $4,000:
Selling price | $9,000 | |
Minus: Mortgage | (6,000) | |
Amount actually received | $3,000 | |
Add difference: | ||
Mortgage | $6,000 | |
Minus: Installment sale basis | 5,000 | 1,000 |
Contract price | $4,000 | |
Your gross profit on the sale is also $4,000:
Selling price | $9,000 |
Minus: Installment sale basis | (5,000) |
Gross profit | $4,000 |
Your gross profit percentage is 100%. Report 100% of each payment (less interest) as gain from the sale. Treat the $1,000 difference between the mortgage and your installment sale basis as a payment and report 100% of it as gain in the year of sale.
If the buyer of your property is the person who holds the mortgage on it, your debt is canceled, not assumed. You are considered to receive a payment equal to the outstanding canceled debt.
Example.
Mary Jones loaned you $45,000 in 2004 in exchange for a note mortgaging a tract of land you owned. On April 4, 2008, she bought the land for $70,000. At that time, $30,000 of her loan to you was outstanding. She agreed to forgive this $30,000 debt and to pay you $20,000 (plus interest) on August 1, 2008, and $20,000 on August 1, 2009. She did not assume an existing mortgage. She canceled the $30,000 debt you owed her. You are considered to have received a $30,000 payment at the time of the sale.
If the buyer assumes any other debts, such as a loan or back taxes, it may be considered a payment to you in the year of sale.
If the buyer assumes the debt instead of paying it off, only part of it may have to be treated as a payment. Compare the debt to your installment sale basis in the property being sold. If the debt is less than your installment sale basis, none of it is treated as a payment. If it is more, only the difference is treated as a payment. If the buyer assumes more than one debt, any part of the total that is more than your installment sale basis is considered a payment. These rules are the same as the rules discussed earlier under Buyer Assumes Mortgage. However, they apply only to the following types of debt the buyer assumes.
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Those acquired from ownership of the property you are selling, such as a mortgage, lien, overdue interest, or back taxes.
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Those acquired in the ordinary course of your business, such as a balance due for inventory you purchased.
If the buyer assumes any other type of debt, such as a personal loan or your legal fees relating to the sale, it is treated as if the buyer had paid off the debt at the time of the sale. The value of the assumed debt is then considered a payment to you in the year of sale.
If you receive property rather than money from the buyer, it is still considered a payment in the year received. However, see Like-Kind Exchange, later.
Generally, the amount of the payment is the property's FMV on the date you receive it.
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The FMV of the property on the date you receive it if you use the cash receipts and disbursements method of accounting,
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The face amount of the obligation on the date you receive it if you use the accrual method of accounting, or
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The stated redemption price at maturity less any original issue discount (OID) or, if there is no OID, the stated redemption price at maturity appropriately discounted to reflect total unstated interest. See Unstated Interest and Original Issue Discount (OID), later.
Example.
You sold real estate in an installment sale. As part of the down payment, the buyer assigned to you a $50,000, 8% interest third-party note. The FMV of the third-party note at the time of the sale was $30,000. This amount, not $50,000, is a payment to you in the year of sale. The third-party note had an FMV equal to 60% of its face value ($30,000 ÷ $50,000), so 60% of each principal payment you receive on this note is a nontaxable return of capital. The remaining 40% is interest taxed as ordinary income.
If you use an installment obligation to secure any debt, the net proceeds from the debt may be treated as a payment on the installment obligation. This is known as the pledge rule and it applies if the selling price of the property is over $150,000. It does not apply to the following dispositions.
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Sales of property used or produced in farming.
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Sales of personal-use property.
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Qualifying sales of time-shares and residential lots.
The net debt proceeds are the gross debt minus the direct expenses of getting the debt. The amount treated as a payment is considered received on the later of the following dates.
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The date the debt becomes secured.
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The date you receive the debt proceeds.
A debt is secured by an installment obligation to the extent that payment of principal or interest on the debt is directly secured (under the terms of the loan or any underlying arrangement) by any interest in the installment obligation. For sales after December 16, 1999, payment on a debt is treated as directly secured by an interest in an installment obligation to the extent an arrangement allows you to satisfy all or part of the debt with the installment obligation.
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The total contract price on the installment sale.
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Any payments received on the installment obligation before the date the net debt proceeds are treated as a payment.
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The debt was outstanding on December 17, 1987.
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The debt was secured by that installment sale obligation on that date and at all times thereafter until the refinancing occurred.
In some cases, the sales agreement or a later agreement may call for the buyer to establish an irrevocable escrow account from which the remaining installment payments (including interest) are to be made. These sales cannot be reported on the installment method. The buyer's obligation is paid in full when the balance of the purchase price is deposited into the escrow account. When an escrow account is established, you no longer rely on the buyer for the rest of the payments, but on the escrow arrangement.
Example.
You sell property for $100,000. The sales agreement calls for a down payment of $10,000 and payment of $15,000 in each of the next 6 years to be made from an irrevocable escrow account containing the balance of the purchase price plus interest. You cannot report the sale on the installment method because the full purchase price is considered received in the year of sale. You report the entire gain in the year of sale.
If you sell property for which you claimed or could have claimed a depreciation deduction, you must report any depreciation recapture income in the year of sale, whether or not an installment payment was received that year. Figure your depreciation recapture income (including the section 179 deduction and the section 179A deduction recapture) in Part III of Form 4797. Report the recapture income in Part II of Form 4797 as ordinary income in the year of sale. The recapture income is also included in Part I of Form 6252. However, the gain equal to the recapture income is reported in full in the year of the sale. Only the gain greater than the recapture income is reported on the installment method. For more information on depreciation recapture, see chapter 3 in Publication 544.
The recapture income reported in the year of sale is included in your installment sale basis in determining your gross profit on the installment sale. Determining gross profit is discussed under General Rules, earlier.
If you sell depreciable property to a related person and the sale is an installment sale, you may not be able to report the sale using the installment method. If you sell property to a related person and the related person disposes of the property before you receive all payments with respect to the sale, you may have to treat the amount realized by the related person as received by you when the related person disposes of the property. These rules are explained next under Sale of Depreciable Property and later under Sale and Later Disposition.
If you sell depreciable property to certain related persons, you generally cannot report the sale using the installment method. Instead, all payments to be received are considered received in the year of sale. However, see Exception, later. Depreciable property for this rule is any property the purchaser can depreciate.
Payments to be received include the total of all noncontingent payments and the FMV of any payments contingent as to amount.
In the case of contingent payments for which the FMV cannot be reasonably determined, your basis in the property is recovered proportionately. The purchaser cannot increase the basis of the property acquired in the sale before the seller includes a like amount in income.
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A person and all entities that are controlled entities with respect to such person.
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A taxpayer and any trust in which such taxpayer (or his spouse) is a beneficiary, unless such beneficiary's interest in the trust is a remote contingent interest.
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Except in the case of a sale or exchange in satisfaction of a pecuniary bequest, an executor of an estate and a beneficiary of such estate.
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Two or more partnerships in which the same person owns, directly or indirectly, more than 50% of the capital interests or the profits interests.
Generally, a special rule applies if you sell or exchange property to a related person on the installment method (first disposition) who then sells, exchanges, or gives away the property (second disposition) under the following circumstances.
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The related person makes the second disposition before making all payments on the first disposition.
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The related person disposes of the property within 2 years of the first disposition. This rule does not apply if the property involved is marketable securities.
Under this rule, you treat part or all of the amount the related person realizes (or the FMV if the disposed property is not sold or exchanged) from the second disposition as if you received it at the time of the second disposition.
See Exception, later.
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Members of a family, including only brothers and sisters (either whole or half), husband and wife, ancestors, and lineal descendants.
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A partnership or estate and a partner or beneficiary.
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A trust (other than a section 401(a) employees trust) and a beneficiary.
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A trust and an owner of the trust.
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Two corporations that are members of the same controlled group as defined in section 267(f) of the Internal Revenue Code.
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The fiduciaries of two different trusts, and the fiduciary and beneficiary of two different trusts, if the same person is the grantor of both trusts.
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A tax-exempt educational or charitable organization and a person (if an individual, including members of the individual's family) who directly or indirectly controls such an organization.
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An individual and a corporation when the individual owns, directly or indirectly, more than 50% of the value of the outstanding stock of the corporation.
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A fiduciary of a trust and a corporation when the trust or the grantor of the trust owns, directly or indirectly, more than 50% in value of the outstanding stock of the corporation.
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The grantor and fiduciary, and the fiduciary and beneficiary, of any trust.
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Any two S corporations if the same persons own more than 50% in value of the outstanding stock of each corporation.
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An S corporation and a corporation that is not an S corporation if the same persons own more than 50% in value of the outstanding stock of each corporation.
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A corporation and a partnership if the same persons own more than 50% in value of the outstanding stock of the corporation and more than 50% of the capital or profits interest in the partnership.
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An executor and a beneficiary of an estate unless the sale is in satisfaction of a pecuniary bequest.
Example 1.
In 2007, Harvey Green sold farm land to his son Bob for $500,000, which was to be paid in five equal payments over 5 years, plus adequate stated interest on the balance due. His installment sale basis for the farm land was $250,000 and the property was not subject to any outstanding liens or mortgages. His gross profit percentage is 50% (gross profit of $250,000 ÷ contract price of $500,000). He received $100,000 in 2007 and included $50,000 in income for that year ($100,000 × 0.50). Bob made no improvements to the property and sold it to Alfalfa Inc., in 2008 for $600,000 after making the payment for that year. The amount realized from the second disposition is $600,000. Harvey figures his installment sale income for 2008 as follows:
Lesser of: 1) Amount realized on second disposition, or 2) Contract price on first disposition | $500,000 |
Subtract: Sum of payments from Bob in 2007 and 2008 | - 200,000 |
Amount treated as received because of second disposition | $300,000 |
Add: Payment from Bob in 2008 | + 100,000 |
Total payments received and treated as received for 2008 | $400,000 |
Multiply by gross profit % | × .50 |
Installment sale income for 2008 | $200,000 |
Harvey will not include in his installment sale income any principal payments he receives on the installment obligation for 2009, 2010 and 2011 because he has already reported the total payments of $500,000 from the first disposition ($100,000 in 2007 and $400,000 in 2008).
Example 2.
Assume the facts are the same as Example 1 except that Bob sells the property for only $400,000. The gain for 2008 is figured as follows:
Lesser of: 1) Amount realized on second disposition, or 2) Contract price on first disposition | $400,000 |
Subtract: Sum of payments from Bob in 2007 and 2008 | − 200,000 |
Amount treated as received because of second disposition | $200,000 |
Add: Payment from Bob in 2008 | + 100,000 |
Total payments received and treated as received for 2008 | $300,000 |
Multiply by gross profit % | × .50 |
Installment sale income for 2008 | $150,000 |
Harvey receives a $100,000 payment in 2009 and another in 2010. They are not taxed because he treated the $200,000 from the disposition in 2008 as a payment received and paid tax on the installment sale income. In 2011, he receives the final $100,000 payment. He figures the installment sale income he must recognize in 2011 as follows:
Total payments from the first disposition received by the end of 2011 | $500,000 | |
Minus the sum of: | ||
Payment from 2007 | $100,000 | |
Payment from 2008 | 100,000 | |
Amount treated as received in 2008 | 200,000 | |
Total on which gain was previously recognized | − 400,000 |
|
Payment on which gain is recognized for 2011 | $100,000 |
|
Multiply by gross profit % | × .50 | |
Installment sale income for 2011 | $ 50,000 |
If you trade business or investment property solely for the same kind of property to be held as business or investment property, you can postpone reporting the gain. These trades are known as like-kind exchanges. The property you receive in a like-kind exchange is treated as if it were a continuation of the property you gave up.
You do not have to report any part of your gain if you receive only like-kind property. However, if you also receive money or other property (boot) in the exchange, you must report your gain to the extent of the money and the FMV of the other property received.
For more information on like-kind exchanges, see Like-Kind Exchanges in chapter 1 of Publication 544.
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The contract price is reduced by the FMV of the like-kind property received in the trade.
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The gross profit is reduced by any gain on the trade that can be postponed.
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Like-kind property received in the trade is not considered payment on the installment obligation.
Example.
In 2008, George Brown trades personal property with an installment sale basis of $400,000 for like-kind property having an FMV of $200,000. He also receives an installment note for $800,000 in the trade. Under the terms of the note, he is to receive $100,000 (plus interest) in 2009 and the balance of $700,000 (plus interest) in 2010.
George's selling price is $1,000,000 ($800,000 installment note + $200,000 FMV of like-kind property received). His gross profit is $600,000 ($1,000,000 − $400,000 installment sale basis). The contract price is $800,000 ($1,000,000 − $200,000). The gross profit percentage is 75% ($600,000 ÷ $800,000). He reports no gain in 2008 because the like-kind property he receives is not treated as a payment for figuring gain. He reports $75,000 gain for 2009 (75% of $100,000 payment received) and $525,000 gain for 2010 (75% of $700,000 payment received).
A contingent payment sale is one in which the total selling price cannot be determined by the end of the tax year of sale. This happens, for example, if you sell your business and the selling price includes a percentage of its profits in future years.
If the selling price cannot be determined by the end of the tax year, you must use different rules to figure the contract price and the gross profit percentage than those you use for an installment sale with a fixed selling price.
For rules on using the installment method for a contingent payment sale, see Regulations section 15a.453-1(c).
If you sell different types of assets in a single sale, you must identify each asset to determine whether you can use the installment method to report the sale of that asset. You also have to allocate part of the selling price to each asset. If you sell assets that constitute a trade or business, see Sale of a Business, later.
Unless an allocation of the selling price has been agreed to by both parties in an arm's-length transaction, you must allocate the selling price to an asset based on its FMV. If the buyer assumes a debt, or takes the property subject to a debt, you must reduce the FMV of the property by the debt. This becomes the net FMV.
A sale of separate and unrelated assets of the same type under a single contract is reported as one transaction for the installment method. However, if an asset is sold at a loss, its disposition cannot be reported on the installment method. It must be reported separately. The remaining assets sold at a gain are reported together.
Example.
You sold three separate and unrelated parcels of real property (A, B, and C) under a single contract calling for a total selling price of $130,000. The total selling price consisted of a cash payment of $20,000, the buyer's assumption of a $30,000 mortgage on parcel B, and an installment obligation of $80,000 payable in eight annual installments, plus interest at 8% a year.
Your installment sale basis for each parcel was $15,000. Your net gain was $85,000 ($130,000 − $45,000). You report the gain on the installment method.
The sales contract did not allocate the selling price or the cash payment received in the year of sale among the individual parcels. The FMV of parcels A, B, and C were $60,000, $60,000 and $10,000, respectively.
The installment sale basis for parcel C was more than its FMV, so it was sold at a loss and must be treated separately. You must allocate the total selling price and the amounts received in the year of sale between parcel C and the remaining parcels.
Of the total $130,000 selling price, you must allocate $120,000 to parcels A and B together and $10,000 to parcel C. You should allocate the cash payment of $20,000 received in the year of sale and the note receivable on the basis of their proportionate net FMV. The allocation is figured as follows:
Parcels A and B |
Parcel C | |
FMV | $120,000 | $10,000 |
Minus: Mortgage assumed | 30,000 | -0- |
Net FMV | $ 90,000 | $10,000 |
Proportionate net FMV: | ||
Percentage of total | 90% | 10% |
Payments in year of sale: | ||
$20,000 × 90% | $18,000 | |
$20,000 × 10% | $2,000 | |
Excess of parcel B mortgage over installment sale basis | 15,000 | -0- |
Allocation of payments received (or considered received) in year of sale |
$ 33,000 | $ 2,000 |
You cannot report the sale of parcel C on the installment method because the sale results in a loss. You report this loss of $5,000 ($10,000 selling price − $15,000 installment sale basis) in the year of sale. However, if parcel C was held for personal use, the loss is not deductible.
You allocate the installment obligation of $80,000 to the properties sold based on their proportionate net FMVs (90% to parcels A and B, 10% to parcel C).
The installment sale of an entire business for one overall price under a single contract is not the sale of a single asset.
To determine whether any of the gain on the sale of the business can be reported on the installment method, you must allocate the total selling price and the payments received in the year of sale between each of the following classes of assets.
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Assets sold at a loss.
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Real and personal property eligible for the installment method.
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Real and personal property ineligible for the installment method, including:
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Inventory,
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Dealer property, and
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Stocks and securities.
-
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Certificates of deposit, U.S. Government securities, foreign currency, and actively traded personal property, including stock and securities.
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Accounts receivable, other debt instruments, and assets that you mark to market at least annually for federal income tax purposes. However, see section 1.338-6(b)(2)(iii) of the regulations for exceptions that apply to debt instruments issued by persons related to a target corporation, contingent debt instruments, and debt instruments convertible into stock or other property.
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Property of a kind that would properly be included in inventory if on hand at the end of the tax year or property held by the taxpayer primarily for sale to customers in the ordinary course of business.
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All other assets except section 197 intangibles.
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Section 197 intangibles except goodwill and going concern value.
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Goodwill and going concern value (whether or not they qualify as section 197 intangibles).
A partner who sells a partnership interest at a gain may be able to report the sale on the installment method. The sale of a partnership interest is treated as the sale of a single capital asset. The part of any gain or loss from unrealized receivables or inventory items will be treated as ordinary income. (The term unrealized receivables includes depreciation recapture income, discussed earlier.)
The gain allocated to the unrealized receivables and the inventory cannot be reported under the installment method. The gain allocated to the other assets can be reported under the installment method.
For more information on the treatment of unrealized receivables and inventory, see Publication 541.
On June 4, 2008, you sold the machine shop you had operated since 1999. You received a $100,000 down payment and the buyer's note for $120,000. The note payments are $15,000 each, plus 10% interest, due every July 1 and January 1, beginning in 2009. The total selling price is $220,000. Your selling expenses are $11,000.
The selling expenses are divided among all the assets sold, including inventory. Your selling expense for each asset is 5% of the asset's selling price ($11,000 selling expense ÷ $220,000 total selling price).
The FMV, adjusted basis and depreciation claimed on each asset sold are as follows:
Depre- ciation |
Adjusted |
||
Asset | FMV | Claimed | Basis |
Inventory | $ 10,000 | -0- | $ 8,000 |
Land | 42,000 | -0- | 15,000 |
Building | 48,000 | $9,000 | 36,000 |
Machine A | 71,000 | $27,200 | 63,800 |
Machine B | 24,000 | 12,960 | 22,040 |
Truck | 6,500 | 18,624 | 5,376 |
$201,500 | $67,784 | $150,216 | |
Under the residual method, you allocate the selling price to each of the assets based on their FMV ($201,500). The remaining $18,500 ($220,000 - $201,500) is allocated to your section 197 intangible, goodwill.
The assets included in the sale, their selling prices based on their FMVs, the selling expense allocated to each asset, the adjusted basis, and the gain for each asset are shown in the following chart.
Sale Price |
Sale Exp. |
Adj. Basis |
Gain | |
Inventory | $ 10,000 | $ 500 | $ 8,000 | $ 1,500 |
Land | 42,000 | 2,100 | 15,000 | 24,900 |
Building | 48,000 | 2,400 | 36,000 | 9,600 |
Mch. A | 71,000 | 3,550 | 63,800 | 3,650 |
Mch. B | 24,000 | 1,200 | 22,040 | 760 |
Truck | 6,500 | 325 | 5,376 | 799 |
Goodwill | 18,500 | 925 | -0- | 17,575 |
$220,000 | $11,000 | $150,216 | $58,784 |
The building was acquired in 1999, the year the business began, and it is section 1250 property. There is no depreciation recapture income because the building was depreciated using the straight line method.
All gain on the truck, machine A, and machine B is depreciation recapture income since it is the lesser of the depreciation claimed or the gain on the sale. Figure depreciation recapture in Part III of Form 4797.
The total depreciation recapture income reported in Part II of Form 4797 is $5,209. This consists of $3,650 on machine A, $799 on the truck, and $760 on machine B (the gain on each item because it was less than the depreciation claimed). These gains are reported in full in the year of sale and are not included in the installment sale computation.
Of the $220,000 total selling price, the $10,000 for inventory assets cannot be reported using the installment method. The selling prices of the truck and machines are also removed from the total selling price because gain on these items is reported in full in the year of sale.
The selling price equals the contract price for the installment sale ($108,500). The assets included in the installment sale, their selling price, and their installment sale bases are shown in the following chart.
Selling Price |
Install- ment Sale Basis |
Gross Profit |
|
Land | $ 42,000 | $17,100 | $24,900 |
Building | 48,000 | 38,400 | 9,600 |
Goodwill | 18,500 | 925 | 17,575 |
Total | $108,500 | $56,425 | $52,075 |
The gross profit percentage (gross profit ÷ contract price) for the installment sale is 48% ($52,075 ÷ $108,500). The gross profit percentage for each asset is figured as follows:
Percentage | |
Land— $24,900 ÷ $108,500 | 22.95 |
Building— $9,600 ÷ $108,500 | 8.85 |
Goodwill— $17,575 ÷ $108,500 | 16.20 |
Total | 48.00 |
The sale includes assets sold on the installment method and assets for which the gain is reported in full in the year of sale, so payments must be allocated between the installment part of the sale and the part reported in the year of sale. The selling price for the installment sale is $108,500. This is 49.3% of the total selling price of $220,000 ($108,500 ÷ $220,000). The selling price of assets not reported on the installment method is $111,500. This is 50.7% ($111,500 ÷ $220,000) of the total selling price.
Multiply principal payments by 49.3% to determine the part of the payment for the installment sale. The balance, 50.7%, is for the part reported in the year of the sale.
The gain on the sale of the inventory, machines, and truck is reported in full in the year of sale. When you receive principal payments in later years, no part of the payment for the sale of these assets is included in gross income. Only the part for the installment sale (49.3%) is used in the installment sale computation.
The only payment received in 2008 is the down payment of $100,000. The part of the payment for the installment sale is $49,300 ($100,000 × 49.3%). This amount is used in the installment sale computation.
Income | |
Land—22.95% of $49,300 | $11,314 |
Building—8.85% of $49,300 | 4,363 |
Goodwill—16.2% of $49,300 | 7,987 |
Total installment income for 2008 | $23,664 |
An installment sale contract may provide that each deferred payment on the sale will include interest or that there will be an interest payment in addition to the principal payment. Interest provided in the contract is called stated interest.
If an installment sale contract does not provide for adequate stated interest, part of the stated principal amount of the contract may be recharacterized as interest. If section 483 applies to the contract, this interest is called unstated interest. If section 1274 applies to the contract, this interest is called original issue discount (OID).
An installment sale contract does not provide for adequate stated interest if the stated interest rate is lower than the test rate (defined later).
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The lowest AFR (based on the appropriate compounding period) in effect during the 3-month period ending with the first month in which there is a binding written contract that substantially provides the terms under which the sale or exchange is ultimately completed.
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The lowest AFR (based on the appropriate compounding period) in effect during the 3-month period ending with the month in which the sale or exchange occurs.
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For a term of 3 years or less, the AFR is the federal short-term rate.
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For a term of over 3 years, but not over 9 years, the AFR is the federal mid-term rate.
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For a term of over 9 years, the AFR is the federal long-term rate.
Section 1274 applies to a debt instrument issued for the sale or exchange of property if any payment under the instrument is due more than 6 months after the date of the sale or exchange and the instrument does not provide for adequate stated interest. Section 1274, however, does not apply to an installment sale contract that is a cash method debt instrument (defined next) or that arises from the following transactions.
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A sale or exchange for which the total payments are $250,000 or less.
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The sale or exchange of an individual's main home.
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The sale or exchange of a farm for $1,000,000 or less by an individual, an estate, a testamentary trust, a small business corporation (defined in section 1244(c)(3)), or a domestic partnership that meets requirements similar to those of section 1244(c)(3).
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Certain land transfers between related persons (described later).
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The lender (holder) does not use an accrual method of accounting and is not a dealer in the type of property sold or exchanged.
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Both the borrower (issuer) and the lender jointly elect to account for interest under the cash method of accounting.
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Section 1274 would apply except for the election in (2) above.
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The stated principal of the debt instrument issued in the sale or exchange.
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The total stated principal of any other debt instruments for prior land sales between these individuals during the calendar year.
Section 483 generally applies to an installment sale contract that does not provide for adequate stated interest and is not covered by section 1274. Section 483, however, generally does not apply to an installment sale contract that arises from the following transactions.
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A sale or exchange for which no payments are due more than one year after the date of the sale or exchange.
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A sale or exchange for $3,000 or less.
Sections 1274 and 483 do not apply under the following circumstances.
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An assumption of a debt instrument in connection with a sale or exchange or the acquisition of property subject to a debt instrument, unless the terms or conditions of the debt instrument are modified in a manner that would constitute a deemed exchange under Regulations section 1.1001-3.
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A debt instrument issued in connection with a sale or exchange of property if either the debt instrument or the property is publicly traded.
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A sale or exchange of all substantial rights to a patent, or an undivided interest in property that includes part or all substantial rights to a patent, if any amount is contingent on the productivity, use, or disposition of the property transferred. See chapter 2 of Publication 544 for more information.
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An annuity contract issued in connection with a sale or exchange of property if the contract is described in Internal Revenue Code section 1275(a)(1)(B) and Regulations section 1.1275-1(j).
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A transfer of property subject to Internal Revenue Code section 1041 (relating to transfers of property between spouses or incident to divorce).
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A demand loan that is a below-market loan described in Internal Revenue Code section 7872(c)(1) (for example, gift loans and corporation-shareholder loans).
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A below-market loan described in Internal Revenue Code section 7872(c)(1) issued in connection with the sale or exchange of personal-use property. This rule applies only to the holder.
A disposition generally includes a sale, exchange, cancellation, bequest, distribution, or transmission of an installment obligation. An installment obligation is the buyer's note, deed of trust, or other evidence that the buyer will make future payments to you.
If you are using the installment method and you dispose of the installment obligation, generally you will have a gain or loss to report. It is considered gain or loss on the sale of the property for which you received the installment obligation. If the original installment sale produced ordinary income, the disposition of the obligation will result in ordinary income or loss. If the original sale resulted in a capital gain, the disposition of the obligation will result in a capital gain or loss.
Use the following rules to figure your gain or loss from the disposition of an installment obligation.
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If you sell or exchange the obligation, or you accept less than face value in satisfaction of the obligation, your gain or loss is the difference between your basis in the obligation and the amount you realize.
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If you dispose of the obligation in any other way, your gain or loss is the difference between your basis in the obligation and its FMV at the time of the disposition. This rule applies, for example, when you give the installment obligation to someone else or cancel the buyer's debt to you.
Example.
Several years ago, you sold property on the installment method. The buyer still owes you $10,000 of the sale price. This is the unpaid balance on the buyer's installment obligation to you. Your gross profit percentage is 60%, so $6,000 (60% × $10,000) is the profit owed you on the obligation. The rest of the unpaid balance, $4,000, is your basis in the obligation.
For gifts between spouses or former spouses, see Transfer between spouses or former spouses, earlier.
The following transactions generally are not dispositions.
If you repossess your property after making an installment sale, you must figure the following amounts.
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Your gain (or loss) on the repossession.
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Your basis in the repossessed property.
The rules for figuring these amounts depend on the kind of property you repossess. The rules for repossessions of personal property differ from those for real property. Special rules may apply if you repossess property that was your main home before the sale. See Regulations section 1.1038-2 for further information.
The repossession rules apply whether or not title to the property was ever transferred to the buyer. It does not matter how you repossess the property, whether you foreclose or the buyer voluntarily surrenders the property to you. However, it is not a repossession if the buyer puts the property up for sale and you repurchase it.
For the repossession rules to apply, the repossession must at least partially discharge (satisfy) the buyer's installment obligation to you. The discharged obligation must be secured by the property you repossess. This requirement is met if the property is auctioned off after you foreclose and you apply the installment obligation to your bid price at the auction.
If you repossess personal property, you may have a gain or a loss on the repossession. In some cases, you also may have a bad debt.
To figure your gain or loss, subtract the total of your basis in the installment obligation and any repossession expenses you have from the FMV of the property. If you receive anything from the buyer besides the repossessed property, add its value to the property's FMV before making this calculation.
How you figure your basis in the installment obligation depends on whether or not you reported the original sale on the installment method. The method you used to report the original sale also affects the character of your gain or loss on the repossession.
Worksheet C. Figuring Gain or Loss on Repossession of Personal Property
Note.Use this worksheet only if you used the installment method to report the gain on the original sale.
|
1. | Enter the fair market value of the repossessed property | ||
2. | Enter the unpaid balance of the installment obligation | ||
3. | Enter your gross profit percentage for the installment sale | ||
4. | Multiply line 2 by line 3. This is your unrealized profit | ||
5. | Subtract line 4 from line 2. This is the basis of the obligation | ||
6. | Enter your costs of repossessing the property | ||
7. | Add lines 5 and 6 | ||
8. | Subtract line 7 from line 1. This is your gain or loss on the repossession |
Example.
You sold your piano for $1,500 in December 2007 for $300 down and $100 a month (plus interest). The payments began in January 2008. Your gross profit percentage is 40%. You reported the sale on the installment method on your 2007 income tax return. After the fourth monthly payment, the buyer defaulted on the contract (which has an unpaid balance of $800) and you are forced to repossess the piano. The FMV of the piano on the date of repossession is $1,400. The legal costs of foreclosure and the expense of moving the piano back to your home total $75. You figure your gain on the repossession as follows:
Example — Worksheet C. Figuring Gain or Loss on Repossession of Personal Property
Note.Use this worksheet only if you used the installment method to report the gain on the original sale.
|
1. | Enter the fair market value of the repossessed property | 1,400 | |
2. | Enter the unpaid balance of the installment obligation | 800 | |
3. | Enter your gross profit percentage for the installment sale | 40% | |
4. | Multiply line 2 by line 3. This is your unrealized profit | 320 | |
5. | Subtract line 4 from line 2. This is the basis of the obligation | 480 | |
6. | Enter your costs of repossessing the property | 75 | |
7. | Add lines 5 and 6 | 555 | |
8. | Subtract line 7 from line 1. This is your gain or loss on the repossession | 845 |
The rules for the repossession of real property allow you to keep essentially the same adjusted basis in the repossessed property you had before the original sale. You can recover this entire adjusted basis when you resell the property. This, in effect, cancels out the tax treatment that applied to you on the original sale and puts you in the same tax position you were in before that sale.
Therefore, the total payments you have received from the buyer on the original sale must be considered income to you. You report, as gain on the repossession, any part of the payments you have not yet included in income. These payments are amounts you previously treated as a return of your adjusted basis and excluded from income. However, the total gain you report is limited. See Limit on taxable gain, later.
-
The repossession must be to protect your security rights in the property.
-
The installment obligation satisfied by the repossession must have been received in the original sale.
-
You cannot pay any additional consideration to the buyer to get your property back, unless either of the situations listed below applies.
-
The requisition and payment of the additional consideration were provided for in the original contract of sale.
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The buyer has defaulted, or default is imminent.
-
-
The total payments received, or considered received, on the sale.
-
The total gain already reported as income.
-
The gain on the sale you reported as income before the repossession.
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Your repossession costs.
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Court costs and legal fees.
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Publishing, acquiring, filing, or recording of title.
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Lien clearance.
Worksheet D. Taxable Gain on Repossession of Real Property
Note.Use this worksheet to determine taxable gain on the repossession of real property if you used the installment method to report the gain on the original sale.
|
1. | Enter the total of all payments received or treated as received before repossession | |||
2. | Enter the total gain already reported as income | |||
3. | Subtract line 2 from line 1. This is your gain on the repossession | |||
4. | Enter your gross profit on the original sale | |||
5. | Enter your costs of repossessing the property | |||
6. | Add line 2 and line 5 | |||
7. | Subtract line 6 from line 4 | |||
8. | Enter the lesser of line 3 or line 7. This is your taxable gain on the repossession |
Selling price | $25,000 | ||
Minus: | |||
Adjusted basis | $19,000 | ||
Selling expenses | 1,000 | 20,000 | |
Gross profit | $ 5,000 | ||
Example — Worksheet D. Taxable Gain on Repossession of Real Property
Note.Use this worksheet to determine taxable gain on the repossession of real property if you used the installment method to report the gain on the original sale.
|
1. | Enter the total of all payments received or treated as received before repossession | 9,000 | ||
2. | Enter the total gain already reported as income | 1,800 | ||
3. | Subtract line 2 from line 1. This is your gain on the repossession | 7,200 | ||
4. | Enter your gross profit on the original sale | 5,000 | ||
5. | Enter your costs of repossessing the property | 500 | ||
6. | Add line 2 and line 5 | 2,300 | ||
7. | Subtract line 6 from line 4 | 2,700 | ||
8. | Enter the lesser of line 3 or line 7. This is your taxable gain on the repossession |
2,700 |
-
Your adjusted basis in the installment obligation.
-
Your repossession costs.
-
Your taxable gain on the repossession.
Worksheet E. Basis of Repossessed Real Property
1. | Enter the unpaid balance on the installment obligation | |||
2. | Enter your gross profit percentage for the installment sale | |||
3. | Multiply line 1 by line 2. This is your unrealized profit | |||
4. | Subtract line 3 from line 1. This is your adjusted basis in the installment obligation on the date of the repossession | |||
5. | Enter your taxable gain on the repossession | |||
6. | Enter your costs of repossessing the property | |||
7. | Add lines 4, 5, and 6. This is your basis in the repossessed real property |
Example — Worksheet E. Basis of Repossessed Real Property
1. | Enter the unpaid balance on the installment obligation | 16,000 | ||
2. | Enter your gross profit percentage for the installment sale | 20% | ||
3. | Multiply line 1 by line 2. This is your unrealized profit | 3,200 | ||
4. | Subtract line 3 from line 1. This is your adjusted basis in the installment obligation on the date of the repossession | 12,800 | ||
5. | Enter your taxable gain on the repossession | 2,700 | ||
6. | Enter your costs of repossessing the property | 500 | ||
7. | Add lines 4, 5, and 6. This is your basis in the repossessed real property | 16,000 |
Generally, you must pay interest on the deferred tax related to any obligation that arises during a tax year from the disposition of property under the installment method if both of the following apply.
-
The property had a sales price over $150,000. In determining the sales price, treat all sales that are part of the same transaction as a single sale.
-
The aggregate balance of all nondealer installment obligations arising during, and outstanding at the close of, the tax year is more than $5 million.
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Farm property.
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Personal use property by an individual.
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Personal property before 1989.
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Real property before 1988.
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Form 1040, line 61.
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Form 1040NR, line 57.
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Form 1120, line 9 of Schedule J.
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Form 1120F, line 8 of Schedule J.
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Answer the questions at the top of the form.
-
In the year of sale, do not complete Part I. Instead, write “See attached schedule” in the margin.
-
For Part II, enter the total for all the assets on lines 24, 25, and 26.
-
For Part III, answer all the questions that apply. If none of the exceptions under question 29 apply, enter the totals on lines 35, 36, and 37 for the disposed assets.
The following examples illustrate how to fill out Form 6252. Sample filled-in forms follow.
On November 1, 2008, Mark Moore sold a lot for $14,700, which included the outstanding balance on a loan. He had purchased the lot on February 17, 1997, for $2,650. He borrowed more on the lot than he paid for it. At the time of the sale, $6,500 remained outstanding on the loan. In the sales contract, the buyer agreed to assume the loan and pay Mark $200 a month (plus 7% interest) for 3 years. The buyer made a down payment of $1,000 on the sale and made a $242 payment in December, $42 of which was interest.
Mark fills out his 2008 Form 6252 as follows:
-
Any ordinary income from the recapture of depreciation.
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Any gain remaining after subtracting that ordinary income from the installment sale income.
In December 2007, Cora Blue sold a painting she inherited in 1995. The buyer paid her $700 down and gave her an installment note for $3,800. The note calls for quarterly payments of $530 until the $3,800 debt is paid off. Each $530 payment includes interest figured at 10% a year on the outstanding debt. She received her first 4 payments on the note in 2008. The principal and interest she received in each payment is given in the table below:
Payment | Interest | Principal |
First | $ 95.00 | $ 435.00 |
Second | 84.13 | 445.87 |
Third | 72.98 | 457.02 |
Fourth | 61.55 | 468.45 |
$313.66 | $1,806.34 |
Cora rounds off cents on her tax return. She reports $314 interest as ordinary income on Form 1040, line 8a. She completes Form 6252 as follows:
You can get help with unresolved tax issues, order free publications and forms, ask tax questions, and get information from the IRS in several ways. By selecting the method that is best for you, you will have quick and easy access to tax help.
www.aarp.org/money/taxaide. For more information on these programs, go to www.irs.gov and enter keyword “VITA” in the upper right-hand corner.
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E-file your return. Find out about commercial tax preparation and e-file services available free to eligible taxpayers.
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Check the status of your 2008 refund. Go to www.irs.gov and click on Where's My Refund. Wait at least 72 hours after the IRS acknowledges receipt of your e-filed return, or 3 to 4 weeks after mailing a paper return. If you filed Form 8379 with your return, wait 14 weeks (11 weeks if you filed electronically). Have your 2008 tax return available so you can provide your social security number, your filing status, and the exact whole dollar amount of your refund.
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Download forms, instructions, and publications.
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Order IRS products online.
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Research your tax questions online.
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Search publications online by topic or keyword.
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View Internal Revenue Bulletins (IRBs) published in the last few years.
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Figure your withholding allowances using the withholding calculator online at
www.irs.gov/individuals. -
Determine if Form 6251 must be filed by using our Alternative Minimum Tax (AMT) Assistant.
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Sign up to receive local and national tax news by email.
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Get information on starting and operating a small business.
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Ordering forms, instructions, and publications. Call 1-800-829-3676 to order current-year forms, instructions, and publications, and prior-year forms and instructions. You should receive your order within 10 days.
-
Asking tax questions. Call the IRS with your tax questions at 1-800-829-1040.
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Solving problems. You can get face-to-face help solving tax problems every business day in IRS Taxpayer Assistance Centers. An employee can explain IRS letters, request adjustments to your account, or help you set up a payment plan. Call your local Taxpayer Assistance Center for an appointment. To find the number, go to
www.irs.gov/localcontacts or look in the phone book under United States Government, Internal Revenue Service. -
TTY/TDD equipment. If you have access to TTY/TDD equipment, call 1-800-829-4059 to ask tax questions or to order forms and publications.
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TeleTax topics. Call 1-800-829-4477 to listen to pre-recorded messages covering various tax topics.
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Refund information. To check the status of your 2008 refund, call 1-800-829-1954 during business hours or 1-800-829-4477 (automated refund information 24 hours a day, 7 days a week). Wait at least 72 hours after the IRS acknowledges receipt of your e-filed return, or 3 to 4 weeks after mailing a paper return. If you filed Form 8379 with your return, wait 14 weeks (11 weeks if you filed electronically). Have your 2008 tax return available so you can provide your social security number, your filing status, and the exact whole dollar amount of your refund. Refunds are sent out weekly on Fridays. If you check the status of your refund and are not given the date it will be issued, please wait until the next week before checking back.
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Other refund information. To check the status of a prior year refund or amended return refund, call 1-800-829-1954.
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Products. You can walk in to many post offices, libraries, and IRS offices to pick up certain forms, instructions, and publications. Some IRS offices, libraries, grocery stores, copy centers, city and county government offices, credit unions, and office supply stores have a collection of products available to print from a CD or photocopy from reproducible proofs. Also, some IRS offices and libraries have the Internal Revenue Code, regulations, Internal Revenue Bulletins, and Cumulative Bulletins available for research purposes.
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Services. You can walk in to your local Taxpayer Assistance Center every business day for personal, face-to-face tax help. An employee can explain IRS letters, request adjustments to your tax account, or help you set up a payment plan. If you need to resolve a tax problem, have questions about how the tax law applies to your individual tax return, or you are more comfortable talking with someone in person, visit your local Taxpayer Assistance Center where you can spread out your records and talk with an IRS representative face-to-face. No appointment is necessary—just walk in. If you prefer, you can call your local Center and leave a message requesting an appointment to resolve a tax account issue. A representative will call you back within 2 business days to schedule an in-person appointment at your convenience. If you have an ongoing, complex tax account problem or a special need, such as a disability, an appointment can be requested. All other issues will be handled without an appointment. To find the number of your local office, go to www.irs.gov/localcontacts or look in the phone book under United States Government, Internal Revenue Service.
Internal Revenue Service
1201 N. Mitsubishi Motorway
Bloomington, IL 61705-6613
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Current-year forms, instructions, and publications.
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Prior-year forms, instructions, and publications.
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Tax Map: an electronic research tool and finding aid.
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Tax law frequently asked questions.
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Tax Topics from the IRS telephone response system.
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Internal Revenue Code—Title 26 of the U.S. Code.
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Fill-in, print, and save features for most tax forms.
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Internal Revenue Bulletins.
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Toll-free and email technical support.
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The DVD is released twice during the year.
– The first release will ship the beginning of January 2009.
– The final release will ship the beginning of March 2009.
www.irs.gov/cdorders for $30 (no handling fee) or call 1-877-233-6767 toll free to purchase the DVD for $30 (plus a $6 handling fee). The price is discounted to $25 for orders placed prior to December 1, 2008. Small Business Resource Guide 2009. This online guide is a must for every small business owner or any taxpayer about to start a business. This year's guide includes:
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Helpful information, such as how to prepare a business plan, find financing for your business, and much more.
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All the business tax forms, instructions, and publications needed to successfully manage a business.
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Tax law changes for 2009.
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Tax Map: an electronic research tool and finding aid.
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Web links to various government agencies, business associations, and IRS organizations.
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“Rate the Product” survey—your opportunity to suggest changes for future editions.
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A site map of the guide to help you navigate the pages with ease.
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An interactive “Teens in Biz” module that gives practical tips for teens about starting their own business, creating a business plan, and filing taxes.
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