WILL SOMEONE FROM TurboTax PLEASE READ THIS MESSAGE
Some new language has been added in the past 2 weeks, but TurboTax (Live and Desktop) is still not allowing use of Installment Sale reporting for valid private company stock sales.
The only IRS restriction on using Installment Sale is that it can't be stock which can be sold on an established stock market or exchange (IRS Pub 537) - in other words it has to be private (unlisted) stock. That language was recently added to the Installment Sale Summary page, put inaccurate restrictions are still in place.
To use Installment Sale, TurboTax requires that the stock meet all the requirements for section 1202 small business stock (QSBS). This is not correct.
Section 1202 has very tight restrictions, including C-corp, company asset levels, certain service businesses excluded, etc. - all necessary to earn the exclusion on capital gains taxation of up to $10 million.
QSBS (1202) is a subsegment of private company stocks.
There are more S-corps than C-corps, and Founders, employees and investors are allowed to use Installment sale for their S-corp stock sales.
There are lots of issuances of C-corp stock that do not meet 1202 (QSBS) requirements.
These restrictions need to be modified.
Now, a taxpayer can say the stock sale meets the 1202 qualifications, but if the stock has been held for 5 years or more, no capital gains are recognized. Overriding the adjustment then precludes e-filing.
PLEASE FIX THIS
