Money paid toward a commercial property sale in 2018 for completed sale in 2019

[prchalifoux]

I was selling a commercial property in 2018 in Massachusetts. The buyer was paying $2,500 a month toward the sale. If the sale went through, the final payment was reduced by this amount. If the sale did not go through, I kept the $2,500 paid monthly. The sale went through in February 2019 and the final payment was reduced by the paid amount. Is the $2,500 a month considered income in 2018 or part of the sale 2019? and will I pay taxes as income in 2018.

[DDollar · Accepted solution]

Because the payments were made over a period that covered two tax years, you have an Installment Sale.  Part your gain will be reported on your 2018 tax return, and part of it on 2019 tax return.

To record an Installment sale in TurboTax Online:

• Click on "Search" and type "Installment Sales" in the window and hit Enter
• Click on "Jump to Installment Sales"
• On the page "Any Other Property Sales" check the box for: "Sales of real estate, cars, or anything else for which you receive payments over two or more tax years (installment sales)" and click Continue
  
• If you are using Deluxe you will be prompted to upgrade to Premier
• On the Installment Sales page answer yes to "Do you want to report an installment sale?"
• Continue through the interview and record the details of your Installment Sale
  

[prchalifoux]

thank you    Are the proceeds considered capital gains? or straight income?

[DDollar]

There will be a small interest income component, but due to the short duration, it will primarily be capital gain/loss depending on your cost basis.

[prchalifoux]

I filed a return already knowing that I would include this in next year.  Should I do a 1040X?  I have other capital gain losses that should offset this amount so my tax return will not change significantly.  Thank you again.

I am not seeing jump to Installment sales ... might be due to my already filing.

[prchalifoux]

PS  I am working under self employed?   perhaps that is why it is not showing up?

[DDollar]

Was the property "Land" or a rental building, or a rental property?

[prchalifoux]

thank you   Turbo Tax cut us off

[prchalifoux]

I appreciate your help ....