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.
