Sale of vacant land

[db80439]

Sold land and received down payment only. Balance is due in 2 years. What do I claim on taxes, as there is no capital gain until final pay off.

[VictoriaD75]

To report the gain, you will include Form 6252 for Installment Sales. Under the installment method, you include in income each year only part of the gain you receive or are considered to have received. You don't include in income the part of the payment that's a return of your basis in the property. 

On an installment sale, the taxable gain reported each year is determined as follows:

Taxable gain = (Total gain realized on the sale / Contract price) x Cash collections during the year

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

[PAnnR]

There is a problem with TurboTax when a vacant land sale is made on an installment basis.

TurboTax asks for a description of the property and records that user entry on both Schedule B (for interest) and on Form 6252 Installment Sale.

However, Schedule B requires that the payer's Name, Address and SSN be listed  which is:

1) different than "property description" TurboTax asks for and places on Schedule B and

2) longer (more text) than limited text filed TurboTax provides for "Property Description" -- that field is not long enough to include:  "Payer's name, Payer's address, Payer's SSN - Vacant Land - Land Contract"

Since it is vacant land, it is NOT a "Home" (another option TurboTax provides) and it is not the Buyer's Principal Residence (another check box TurboTax asks about under Installment Sale).

What to do?

[PatriciaV]

To enter the information on the buyer of a seller-financed mortgage in TurboTax for Desktop, go to Forms and find Form 6252. In Part II, complete the Payments Received Smart Worksheet with all the buyer's information. Entering the information of Form 6252 will change the description on Schedule B to "See Seller-Financed Interest Statement."

If you're using TurboTax Online, you should enter this transaction as the Sale of Business Property. When you check the box for "Sales...for which you receive payment over two or more tax years," the program will provide a page to enter the details for the buyer.