We sold a small retail business as a Schedule C Sole Proprietorship at the beginning of 2023 on an installment sale.
With our 2023 return we included: Asset Allocation - Form 8594, Installment Sale Income - Form 6252 and Sales of Business Property - Form 4797.
If we are not mistaken, the only sale related form we need to include with our return every year until the final installment is received is Form- 6252 Installment Sales Income. The others are filed on the year of the sale. Is this correct?
On our Schedule C for 2024, we show no income, but do show returns and allowances, based on the redemption of Gift certificates for which we are reimbursing the new owners.
We also show and expense for accounting and tax help related to the sale incurred during 2024. Would we be advised to include a note with our Schedule C explaining the nature of the expense and “returns” on the document or assume that the numbers will speak for themselves?
Thanks!
Yes, you will continue to report the installment sale on Form 6252 until the final payment is received.
As long as you have ongoing business activity, you may report the related "winding up" expenses without explanation. Keep good records in case the IRS has questions.