Where do I record imputed interest income on a zero interest contract for the sale of a business interest?

[cturnquist]

I seller-financed a business interest using a zero-interest loan.  I have imputed interest income (using the Applicable Federal Rate) on the note that I need to recognize.  Where in TurboTax do I record this interest income?

[ColeenD3]

Was this an installment sale? You do not include the interest on Form 6252. Include it on Schedule B like any other interest.

Enter the amount of interest received into TurboTax as if you received a 1099-INT under the "Personal Income" tab.  Enter the name of the party that the interest was received from in the "Received from" field, and the dollar amount of the interest in the "Box 1 - Interest Income" field.

This will correctly report the interest income on your Schedule B.

@cturnquist

[cturnquist]

Okay, thanks!

And no, I didn't treat it as an installment sale, as the sales transaction actually resulted in a small capital loss to me. 

As far as treating this interest income as if I had received a 1099-INT, do I not need to worry about providing an address, SSN, etc. of the individual on the other side of the transaction?

[VictorW9]

Yes, you will need to prepare an amortization schedule to figure out the interest. You may also need to send the other party a form 1098 mortgage statement detailing the imputed interest paid to you.

[cturnquist]

Already prepared an amortization schedule to compute the interest amount.  

But if this interest is not related to a mortgage, would a Form 1098 be appropriate?  Or is there some other form that I need to send him?

I did provide him with a copy of the amortization schedule.

[VictorW9]

Sorry I misread your original post and incorrectly assumed the interest payments belong to a sale of property. Being that you said you didn't use the installment sale method, then the whole capital gain is taxed in the year of sale. Imputed interest will not have any effect if you didn't use the installment sale method.

[cturnquist]

There was no gain.  I sold the interest for a small capital loss.  But is there a place in TurboTax where I would need to record the address and TIN of the other party?  The step-by-step prompts don't seem to be giving me that option anywhere.

[DaveF1006]

 Report it as 1099 INT interest income. You can record the name of the person who paid it but is not necessary to record the TIN as this isn't required for reporting interest income.

1. go to federal>income and expenses
2. interest and dividends>interest on 1099 INT