topic Could sure use help filling out form 6252 in Deductions & credits

Could sure use help filling out form 6252

RDS229 — Fri, 27 Dec 2024 18:48:14 GMT

2024 land sale - price 210K, 50K down payment, seller (me) financed 160K over next 5 years.

Land cost basis 27K, closing costs (commissions etc.) 21K

Have rec'd 2 monthly installment for 2024, totaling $1599 interest and $319 capital gain.

Image shows numbers entered excluding cost basis and closing costs - works but I'm guessing not acceptable? How does one properly represent the 50K down payment on form 6252? right now it's listed as contract price.

Re: Could sure use help filling out form 6252

RDS229 — Fri, 27 Dec 2024 19:11:57 GMT

Oh, forgot to mention, when I enter cost basis/closing costs it does this ratio thing(to installment capital gains) that doesn't apply to my situation, hence am trying to get away without inputting it on Form 6252.

Re: Could sure use help filling out form 6252

Mike9241 — Fri, 27 Dec 2024 20:02:09 GMT

that 6252 is almost totally incorrect

as best as i can figure from what you provided

line 5 the 210K sales price

line 6 nothing - the installment proceeds to be received in the current and future years is not report ed on this line

line 8 27K the cost of the land

lin11 21K sales expenses

line 16 gross profit should be 162K (210K-27K-21K)

line 19 162/210

line 21 50K (the down payment + 319 principal received on the 2024 payments.

it also seems like you'll have a huge balloon payment in year 5 since 959 per month will not fully amortize the loan of 160K in 5 years.

Re: Could sure use help filling out form 6252

RDS229 — Fri, 27 Dec 2024 20:55:04 GMT

You are correct, 150K-160K balloon payment can happen any time in the next 5 years.

I've put the numbers in as you directed, see image. Still not sure how 50K down payment is represented. Also, not sure how Gross Profit percentage (.7714) works? I figured cost basis and closing cost all got eaten up by 50K down payment so that all future cap gains from installments would be undreduced?

Thanks for your help.

Re: Could sure use help filling out form 6252

RDS229 — Sun, 29 Dec 2024 00:25:28 GMT

Mike9241, what do you think about putting the 50K down payment in line 6?

Seems to clean up everything and then I don't have to deal with Gross Profit percentage or ratio stuff.

Re: Could sure use help filling out form 6252

Mike9241 — Sun, 29 Dec 2024 02:54:31 GMT

the 50K is a collection in the year of sale. the pro-rata portion of this is taxable as capital gain. it is properly reported on line 21 not line 6

Line 21 (from instructions - interest would not be included)
Enter all money and the FMV of any property
or services you received during this tax year.

line 6 instructions

Line 6
Enter only mortgages, debts, or other
liabilities the buyer assumed from the seller or
took the property subject to. Don’t include
new mortgages the buyer gets from a bank,
the seller, or other sources

you stated the 50K was a down payment. that does not meet the criteria for items to enter on line 6

putting in on line 6 would result in you understating your income (capital gain) for the year of sale by about 77% of 50,000. if caught there would likely be substantial penalties and interest

Re: Could sure use help filling out form 6252

RDS229 — Sun, 29 Dec 2024 04:11:23 GMT

Interesting,

this is the reply I got from MS copilot...
where does down payment best go on Form 6252?

When filling out Form 6252 for an installment sale, the down payment should be included in the contract price on line 5. This amount is part of the total sales price and will be used to calculate the gross profit and the installment sale income.

=======================

Makes no mention of including the payment in line 21 (it isn't an installment payment, those occur after the sale, right?).
If anyone can find a sample case or text where it explicitly says add the down payment to line 21, I'd appreciate it!

Re: Could sure use help filling out form 6252

RDS229 — Sun, 29 Dec 2024 04:27:05 GMT

Also, MS copilot:

Not included

The down payment is not included on line 21 of Form 6252. Line 21 should only include the total amount of installment payments received, whether in cash, check, or any other form of consideration.

Re: Could sure use help filling out form 6252

RDS229 — Tue, 07 Jan 2025 22:29:20 GMT

So much for MS Copilot.

Google Gemini says:

Yes, the down payment is included on line 21 of Form 6252.

Line 21 of Form 6252, Installment Sale Income, is for reporting the "Payments received during the year." This includes all cash and the fair market value of any property or services received. Since a down payment is a cash payment made at the time of sale, it is considered part of the payments received during the year and should be included on line 21.

Here's a breakdown of what to include on line 21:

Cash: This includes the down payment and any other cash payments received during the year.
Fair Market Value of Property or Services: If you received property or services as part of the sale, include their fair market value.
Amounts Withheld: Include any amounts withheld to pay off a mortgage or other debt, or to pay real estate broker or legal fees.

Important Note: Do not include the buyer's note, a mortgage, or other debt assumed by the buyer on line 21. However, a note or other debt that is payable on demand or readily tradable on an established securities market is considered a form of payment and should be included.

By including the down payment on line 21, you are accurately reporting the payments received during the year for the installment sale. This is essential for calculating the correct amount of taxable income from the sale.