How do we report land we sold at a significant loss and are doing owner financing. How do I report this? Is the interest payment reportable as income?

[sassyrascal51]

We purchased the land 3 years ago. Our cost basis is $77,908.  We sold it this summer for $68,500 and are doing owner financing.

The contract is for 15 years. We got a statement from the mortgage company handling the payments for us, but not a formal tax reporting form.

How do I report the sale and the interest?  I tried to enter as an installment contract, but TurboTax said it didn't qualify, to report it another way.  Help

[RichardG · Accepted solution]

Because you sold the property at a loss, the sale is not eligible for installment reporting.  You'll need to enter the transaction in two ways.

• First, go to Federal Taxes>Wages & Income>Investment Income >Stocks, Mutual Funds, Bonds Other.  Proceed through the interview until you reach the question Choose the type of investment you sold, then select land.  Report the sale and your loss of $9408.
• Next, report the interest income you received.  Go to Federal Taxes>Wages & Income>Interest and Dividends>Interest from Seller-Financed Loans

You'll need to report the interest on the loan each year.