Could sure use help filling out form 6252

[RDS229]

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.

[RDS229]

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.

[Mike9241]

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. 

[RDS229]

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.

[RDS229]

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.

[Mike9241]

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 

[RDS229]

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!

[RDS229]

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.