Thank you so much for having taken the time to reply my question about installment-sale income. I'm still confused though on how to proceed for TY2019. I looked at my 2018 Turbo Tax return and wonder whether it was done correctly.
On Form 6252, I completed the following:
1) Selling price - $245,750
2) Mortgages, debts - $119,700
3) Basis of property sold - $206,550
4) Depreciation allowable - $59,261
5) Expenses of sale - $147,289
6) Gross profit percentage - $3,110
There were also the gross profit of $95,171 and the contract price of $125,870, creating a gross-profit percentage of .7561. When the principal payments of $10,135 were multiplied by the gross-profit percentage of .7561, you got an installment-sale income of $7,663.
According to the Unrecaputured Section 1250 Gain Smart Worksheet, Turbo Tax took the total installment-sale gain of $7,663 and divided it into long-term capital gains of $532 (taxed at 0%, 15% or 20%) and unrecaptured Section 1250 gain of $7,131 (taxed at 25%).
Turbo Tax then took the unrecaptured Section 1250 gain of $7,131 and subtracted it from the total unrecaptured Section 1250 depreciation of $59,261 to arrive at the "Unrecaptured Section 1250 depreciation carryover to 2019," which is $52,130.
However, for the instructions for Form 6252, it states: "Any ordinary income recapture under section 1245 or 1250 (including sections 179 and 291) is fully taxable in the year of sale even if no payments were received. To figure the recapture amount, complete Form 4797, Part III. The ordinary income recapture is the amount on line 31 of Form 4797. Enter it on line 12 of Form 6252 and also on line 13 of Form 4797."
On my 2018 return, though, Line 31 of Form 4797 and Line 12 of Form 6252 state $0.
So, I'm not clear why Turbo Tax created a taxable 1250 gain on only part ($7,131) of the total unrecaptured Section 1250 depreciation of $59,261 with a carryover to 2019 of the difference. Can you help me with this?
