Installment Sale - Contingent Payments

[masony]

I have a sale of a partnership interest using the installment sale method.  Payouts in future years meet the definition of contingent payments since they are based on future conditions that cannot be determined by the end of the tax year.  Does someone know if Turbotax can support the required methods for contingent payments listed in the regs (i.e. maximum selling price, fixed payment period, etc)?

From Pub 537:

Contingent Payment Sale
A contingent payment sale is one in which the total selling price can’t be determined by the end of the tax year of sale. This happens, for example, if you sell your business and the selling price includes a percentage of its profits in future years.

If the selling price can’t be determined by the end of the tax year, you must use different rules to figure the contract price and the gross profit percentage than those you use for an installment sale with a fixed selling price.

For rules on using the installment method for a contingent payment sale, see Regulations section 15a.453-1(c)

[DianeW777]

Yes, TurboTax can handle an installment sale with a contingent payment sale.  However, this will require manual entries that may change in future years and you must maintain the appropriate records that will allow you to make the necessary changes to reflect the appropriate income each year.  A similar situation might occur if an installment sale selling price changed in a future year due to a reduction in that selling price by agreement of the parties involved.

There are examples that may help you relate to your specific situation about a contingent payment sale. This link may be helpful for you to be prepared with the return entry. Search by holding the Ctrl key and the letter F, then type 'contingent' to quickly find information.

•  CFR § 15a.453-1

[masony]

Thank you for the comments on how the installment method works on contingent payments. 

Does anyone know if the Turbotax Online version supports this manual entry?  I couldn't see anything that allowed this override. 

Or if not, does the downloaded software version work for this?

[DianeW777]

If your installment sale is carried over from last year, and you are not asked to enter the sale information (see image below) then you should use the TurboTax Download version to allow the override. 

• How to switch from TurboTax Online to TurboTax CD/Download

[Island Hopper]

TurboTax Home and Business 2022 does not handle Contingent Payment Installment Sales.

I sold private company stock in 2021 with an initial payment and a maximum earnout payment, dependent upon results, to be paid in 2022.

The first year's gross profit and capital gain on the initial payment assumed the max earnout.

It came in less. 

Because I paid a larger expect gross profit in 2021, the gross profit on the small than expected earnout payment should be less.

TurboTax does not provide the adjusting worksheet shown in the IRS instructions.

Seems all I can do is override the capital gain, which will likely prevent online filing.

anyone have suggestions?

Thanks, GaryM

[Critter-3]

sorry but overrides are the only way to do it & not only will it negate the accuracy guarantee it may keep you from efiling. 

[Island Hopper]

Thanks for the confirmation.

I CAN"T BELIEVE that Intuit has not added contingent installment sales to the basic logic.

It is very easy to do, and there are a great number of small business owners and angel investors that sell on a contingent payment basis.

Does anyone at TurboTax read these community messages?