An installment sale is a sale of property in which the taxpayer receives at least one payment for the sale after the tax year of the sale. Such a sale isn't required to be reported as an installment sale, and the taxpayer can alternatively elect to report the entire gain in the year of the sale.
These kinds of sales cannot be treated as installment sales:
- Sales of inventory in the ordinary course of a trade or business.
- Sales that result in a loss.
- Sales of stock or securities traded on an established securities market.
- Sales of real property held for sale in the ordinary course of a trade or business. Exception: A dealer of timeshares and residential lots can report certain sales as installment sales if they elect to pay a special interest charge. See IRC section 453(l)(2)(B).
The form consists of four parts:
- Lines 1-4 - This part describes the property and indicates the date acquired and date sold.
- Part I, Gross Profit and Contract Price - This part includes the details about the sale for the purpose of calculating two important numbers, the gross profit and the contract price.
- Part II, Installment Sale Income - This part uses the two calculated numbers from Part I along with the amount of the current year's payments to determine this year's installment sale income.
- Part III, Related Party Installment Sale Income - If the property was sold to a related party, this section needs to be completed, as special rules apply.
Note: Every part that was completed in the first year needs to be completed in every subsequent year. If you didn't prepare the prior year return that included an installment sale, be sure to get a copy of the prior year's Form 6252 so you can complete the form correctly in the current year.
To enter an installment sale in TaxSlayer Pro, from the Main Menu of the tax return (Form 1040) select:
- Installment Sale (6252) - Select New for a new installment sale or select Prior if the installment sale is in last year's return and you want to pull its information forward into the current year's return.
Note: This is a brief guide on entering Form 6252 into the TaxSlayer Pro program. This is not intended as tax advice.