Where do i enter capital gain from an installment sale

[barb-1989]

I sold land in 2016.  I received an installment note for the sale.  I received 6 monthly payments of principal and interest.  Where do I enter the gain I received from the note.

[JohnR]

Hi:

Capital gains, losses, and 1099-B forms are all entered in the same place:

1. Open (continue) your return in TurboTax.
2. In the search box, search for investment sales and then click the "Jump to" link in the search results.
3. Answer Yes to the question Did you sell any investments?
   • If you land on the Here's the investment sales we have so far screen, click Add More Sales.
4. Continue following the onscreen instructions and we'll calculate the gain or loss from the sale.

[JCL22]

why the principal payment amount is considered as capital gain?  Please advise.

[RobertG]

When you report an installment sale you first calculate your profit percentage on the sale.

The percentage of the principal payment that represents profit is taxed as a capital gain.

The interest payment is reported as interest, and taxed as ordinary income.

@JCL22

[JCL22]

Hi,  not sure if this is a bug in the software itself or I made data entry mistake.  I sold my property  with 10years installment payment plan from the buyer.  I actually paid the capital gain already at the same year the property is sold. But, why TurboTax is putting the yearly principal payment in the capital gain box for me, not in the ordinary interest box.  I simply followed the steps provided, but this steps lead me to the enter the data in the wrong place. Please advise. I needed to fix it because I do not want to overpay since I already paid the capital gain at year 1.

[RobertG]

If you already paid the capital gain on the entire sale in year 1, you should not be reporting it as an installment sale.

Just report the interest you are receiving as interest received.

The tax has already been paid on the principal.

An installment sale is a sale of property where you'll receive at least one payment after the tax year in which the sale occurs.

You're required to report gain on an installment sale under the installment method unless you "elect out" on or before the due date for filing your tax return (including extensions) for the year of the sale.

You may elect out by reporting all the gain as income in the year of the sale.

Topic No. 705 Installment Sales

@JCL22

[JCL22]

Thank you so much. Now, I would have to correct my 2018 tax return because I claimed the entire capital Gain at the tax year the property is sold in 2017. Thank Goodness, I caught this now when doing tax return for 2019. However, I do not remember seeing the option for me to elect out by reporting all the gain as income in the year of the sale. All I did is to follow the steps provided in the software. I reviewed the actual tax form and confirmed that indeed I paid the capital gain in lump sum which i do not mind. Thank you again for your quick reply and much appreciated!!! Stay safe and stay healthy, Cheers! Jenny

[JCL22]

Hello, sorry to bother you again... just wanted to correct my previous findings.  For installment sale of  my property in  2017, the actual entire capital gain was $24,050 and I already claimed $19,950 at year 1. So, year 2018, where and how I can enter the remaining gains $4100.  Apparently, I did it wrong in 2018.  I need to fix it.  I understand where the interest goes.  I am confused by following the steps actually.  It will ask me if I have installment Sale in 2018 which I did not.  In my original 2018 tax return, I answered Yes.  That is wrong.

[azlari]

I sold the rental property on 7 year contract in 2021 and want to delay payment of capital gain but 2021 premier keep on reporting all gain for year 2021 even if i report it as installment sale. What i am doing wrong?

[LeonardS]

You should review the entries for your installment sale.  

To verify your entries are correct follow these steps:

1. Open your return in TurboTax.
2. In the search box, search for installment sales and select Jump to installment sales.
3. Check the box next to Sales of real estate, cars, or anything else for which you receive payments over two or more tax years (installment sales). Select Continue.
4. Answer Yes to Do you want to report an installment sale?
5. Follow the instructions to enter your sale details.

If you still have problems after reviewing your entries please post your question on this thread.

[azlari]

Thanks for your advise. I followed your instruction and when I got to installment sale, It stated that I have already reported it in business sale and continue to report all capitol gain for this year. Will greatly appreciate how to correct it. Thanks

[azlari]

Thanks for your advise. I followed your instruction and when I got to installment sale, It stated that I have already reported it in business sale and continue to report all capitol gain for this year. Will greatly appreciate how to correct it. Thanks

[RobertB4444]

@azlari  You need to delete all of the installment sale information that you have entered and start over.  Be careful how you answer the questions.

[azlari]

Thanks for the response. I figured it out after I went to IRS website. It is disappointing the turbo Tax directions are not clear. I have been using tubo tax for decades. This year version is not as good as before. I never had to go to community or other places to get answers.

[Davinb]

I can't get Turbotax to only reflect the gain of the first year - it keeps applying the full gain on the sale, but shouldn't I be able to only reflect the gain on the "down payment" portion?

I did reflect the Loan amount when asked for "the amount of debt the buyer took over"

Thanks,  @RobertG