You will need to file a Form 6252 Installment Sale if this meet the criteria for business property.
If
you elect to use the installment method to report income from an installment
sale, you are taxed only on the gain portion of the payments you receive during
each year - including the year of sale.
When you sell
something for more than you paid for it, you report the income on your taxes
for the year in which the sale took place. Sometimes, though, the buyer spreads
the payments out over more than one year. In that case, it’s what the Internal
Revenue Service (IRS) refers to as an “installment sale.” Taxpayers use Form
6252 to report income from installment sales.
Form 6252 helps you
figure out how much of the money you received during a given tax year was a
return of capital, how much was a gain and how much was interest.
When you fill out
Form 6252, TurboTax will automatically carry this year's portion of the gain to
Form 4797. It will also carry the interest portion that you entered to Schedule
B and a Seller-Financed Interest Statement for Filing.
If the bank account that held any Installment
payments paid any interest on the money held in that account during the year,
that will be a separate 1099-Interest entry.
Here's how to enter Form 6252:
- Open (continue) your return
in TurboTax, if it's not already open.
- In the search box, search for
6252 and then click the "Jump to" link in the
search results.
- Follow the prompts. TurboTax
will create your Form 6252.
Things to Consider:
- If you do
not use the installment method, the entire gain in the example above would be
taxable this year (but not in future years).
- If you use
the installment method, the total gain will not be taxed this year and you will
pay taxes on it as it is received in later years.
- If you have property
sales subject to recapture, you must pay tax on certain amounts in the year of
sale, no matter when you receive the payments.
