Turbotax appears to be claiming too high gain on installment sales? Can anyone advise if I'm entering correctly?

[brfiesin]

If I purchased an asset for $20,000 and sold it for $40,000 on an installment sale, where I received $10,000 now and $10,000 a year for the next 3 years, then I would imagine I would either:
a- be charged $0 tax in year 1 because $10k received against $20k basis 
b- be charged tax on $5k in earnings because I received 25% of the gains I expect to receive.

However, what I see turbotax doing is determining that I am being taxed on the entire $10,000 now which doesn't seem to account at all for the purchase price.

This doesn't make sense to me and makes me think it could be a bug or I am doing something wrong- any insight?

I am entering $20,000 as the asset purchase price, $40,000 as the asset sale price, and $30,000 as the installment sale, and $0 as amount received in installment per the turbotax forms. That should not render $10,000 taxable, but it says "$10k taxable gains" and my tax goes up by that proportion. 

[Mike9241]

you have not provided enough info. we do not know what you sold or whether any depreciation was taken (or should have been taken)  on it wether the buyer assumed any debt on the sale. we can not see your return. review forms 6252 and 4797 because that's where the taxable amounts would be calculated based on your entries.

if it's not depreciable b would be the correct answer.

[Rick19744]

While I agree that we don't have sufficient facts (depreciation, etc) at this point to provide further help, your last paragraph does not make sense.

I don't believe you are inputting the correct information based on how the form 6252 flows.

Take a look at the actual form in TT.  

Make sure line 16 is reflecting the correct gross profit; should be $20,000 (based on the limited information).

Then take a look at Part II of the form 6252 and review what amounts TT is reflecting and adjust your input accordingly.

Based on the limited facts (assuming no depreciation, etc.):

• Line 16 - $20,000
• Line 18 - $40,000
• Line 19 - .5
• Lines 21 and 22 - $10,000
• Lines 24 and 26 - $5,000

[brfiesin]

Helpful thanks. Still working through it, just wanted you to know your feedback was heard.

I oversimplified it conceptually to assure I understand how how turbotax was trying to handle it. If I skip turbotax and go straight to the actual tax forms thats fine, but then I  am running into errors when turbotax recalculates it from other form changes, but thats beyond the scope of this question- so i need to assure all the other components are entered right before I go to the manual forms. (The installment sale is across multiple assets and  businesses, I have to allocate that properly and I am still waiting on my CPA allocations from the cost segregation studies). Thanks! 

[brfiesin]

OK Thanks for your help.

No matter how many times I read through what turbotax was asking me, I kept putting in how much was the installment sale debt amount and not how much debt was assumed by the buyer, and thats what was driving my numbers through through the roof. (IE- if in my scenario, turbotax was interpreting it as  me purchasing it for $20,000, selling it for $40,000, and turbotax would ask how much debt was included in the price, but I realize now that is assumed debt and not installment loan debt- Turbotax interpeted it as I received $10,000 now AND seller assumed $30,000 in debt AND the seller was paying me $10,000 a year for 3 years...). However, in my case the seller did not assume any debt, so turbotax was interpreting that as taxable. (add some zeros to my hypothetical use case above and see how quickly that compounds) Your direction to look at the actual form flows helped to catch my error in misinterpreting what turbotax was asking me, and giving me the precise tax form numbers to look at was very helpful. Thank you for helping me catch the misunderstanding in the turbotax user flow!

Now I was able to get the actual forms to look correct without manually changing them- keeping turbotaxes automation, so when I update my final asset segregations, the forms should be right. Thanks much for helping me catch my error!