1120s - Reporting interest from an APA installment sale

[Walkman]

Does the interest earned from an APA installment sale get reported on the 1120s as part of business income, or instead on the Schedule K-1 box 4 (Interest Income)?

[tagteam]

See the following thread:

https://ttlc.intuit.com/community/business-taxes/discussion/re-s-corp-installment-sale/01/1376116/hi...

[Walkman]

Thank you for the reply, but it doesn't answer this question.

[Critter]

It is reported on the 1120S as interest income and is then passed thru to the owner on the K-1 as interest income.    Read the instructions for line 5...     https://www.irs.gov/pub/irs-pdf/i1120s.pdf

[Walkman]

If earned interest is listed on 1120s Line 5 wouldn't it flow to the K-1 on Line 1 (Ordinary business income)?  

[tagteam]

Just my opinion, nothing more, but if the sale was not in the ordinary course of business, I cannot see why it would be reported as anything other than portfolio interest (Line 4, Schedule K). 

A sale of an asset owned by the corporation (and previously used in the corporation's business) and then sold to a third party is not really a sale in the ordinary course of business (i.e., it is not inventory nor is the interest received on something like an account receivable).

[Critter]

Follow the program interview screens and it will help you enter all the information needed. 

[tagteam]

In the Business edition, I believe some lines on Schedule K of Form 1120-S need to be entered in Forms Mode.