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 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 ProWeb, from the Federal Section of the tax return (Form 1040) select:
- Income
- Other Income
- Installment Sale Income - For a MFJ return, indicate if the form is for the taxpayer, spouse, or both. Enter the property information, including a description of the property, the date acquired, and the date sold. Click Continue when finished.
- Enter the details about the sale in the original year. Click Continue when finished.
- Enter the details about the installment sale income received in the current year as well as the total received in prior years, if any. Click Continue when finished.
- Enter the related party information, if applicable. Click Continue when finished.
Note: This is a brief guide on entering Form 6252 in TaxSlayer ProWeb. This is not intended as tax advice.
Additional Information: