I sold property in 12/2017 and used the installment plan. However, where do I enter the information on the installment sale?

[KennethB]

According to the tax law this would fall under the rules for installment sale.  You are required to report gain on an installment sale under the installment method unless you "elect out" on or before the due date for filing your tax return (including extensions) for the year of the sale.   The year of sale is the year the contract was entered into.

To enter an installment sale (Form 6252) in TurboTax Premier :

• Federal Taxes tab,
• Personal Income
• I’ll choose what I work on
• Select Business Items
• Less Common Business Situations
• Sale of Business Property 
• Any other property sales
• Check the box titled sales of real estate, cars or anything else for which you receive payments over two or more years 
• Click continue & the interview will guide you from there.  

What Is an Installment Sale? An installment sale is a sale of property where you receive at least one payment after the tax year of the sale.  It does not apply in sales where there was a loss.

Interest must be reported each year.  If there is no stated interest in the contract, then unstated or imputed interest must be calculated and reported

For more information, please refer to IRS Publication 537 - "Installment Sales" at the following link:  https://www.irs.gov/pub/irs-pdf/p537.pdf

[Carl]

If this was rental property you sold, you start reporting the sale in the Rental & Royalty Income section. This way the disposal of the rental assets (as sold) is accounted for. You'll get to a point where it will ask if it's an installment sale. Select YES and the interview will guide you through the process.
If you have more than one asset listed in the rental assets section, let me know and I'll help you with a shortcut so you don't have to go through the installment sale process with each individual asset.

[Redan54]

@Carlwhat is the shortcut if there's lots of assets in that particular property?

I see where it says to just report it in Installment Sales not Sch E https://ttlc.intuit.com/community/investments-and-rental-properties/discussion/re-trying-to-report-a... I went thru just the Installment Sales section and now I have 2 entries in my for the same property.

One entry was generated by the Rental Income interview (took forever to go thru each asset and deal with the allocation $) and one entry was generated by the Installment Sale section (super ez to fill out)...

Was the shortcut "go thru Rental Income all the way & pretend it is still owned" and then go to the section where it says Rental Property Sold not mentioned anywhere else in the program & do installment sale there?  It seemed like the stand alone Installment Sale under "property sold not mentioned elsewhere" was the easiest way (even tho it later asks is this one of the previously mentioned rental properties to link) coz it just asked for overall depreciation instead of individual asset depreciation and actually asks for the total price sold in Installment Sale section.... whereas when I went thru the Rental Income's Installment Sale section it only asked for the principle payment & interest received in 2019 and no questions (that I came across during the Rental section's Installment Sale area) were asked about the overall total price sold by the end of 2022....

[Carl]

If you did a seller financed sale (which is an installment sale) then I can't help much with that really. I myself have never done an installment sale, and honestly don't understand why anyone would even consider it when selling something such as real estate.

But I do know that when reporting the sale in the SCH E section of the program, one of the questions asked somewhere along the line, is if this was an installment sale. If you have multiple assets listed for the property in the assets/depreciation section this is a real PITA doing all the math you have to do manually to split your income each year from the sale, proportionally across all assets showing a gain on all assets if you sold at a gain, or a loss on all assets if you sold at a loss.

There is another way to do this, but let me make your choices clear.

Reporting the installment sale across assets in the SCH E section of the program is the same as getting from point A to point B in a straight line by using a machete to cut a swath in the jungle between the two points. It'll take you three hours.

The other way to get from point A to point B is to walk around the jungle. It may be an easier trip. But its longer and will still take you three hours.

So if you have a multitude of assets I would recommend walk around the jungle.

Work through the SCH E section of the program for that property and in the Property Profile section "do' "not" indicate that you sold the property. Instead, indicate that you "converted it to personal use"  Then on the next screen, (and I can't stress this enough) *READ* *THE* *SMALL* *PRINT*. Otherwise, your selections WILL be wrong.  New even if the last renter moved out months before you sold it, then provided you did not live in the property for one single day, YES YES YES THE PROPERTY WAS RENTED ALL YEAR! Finish working through the Property Profile section.

Next, elect to start/update the Assets/Depreciation section. YOu will need to do several things as you work through each individual asset one at a time.

 - Wire down the COST and the PRIOR DEPRECIATION of this asset. (Don't worry about the amount in COST OF LAND, as it's already included in COST)

 - Select YES, I stopped using this asset in 2019

 - The date of your sale or disposition will be the closing date on  your sale of the property.

 - YES! Special Handling *IS* Required!

 - Write down your 2019 depreciation on this asset.

Once you have done all the above for each individual asset, Add up all the COST amounts and that's your cost basis. Then add up all the depreciation amounts (both current and prior years) and that's the total depreciation you have taken on the property.

Finish working through the rest of the SCH E section.

Now with the math you did manually, you have your Cost basis and total depreication taken, and that's all you need to report this sale in the "Sale of Business Property" section. After you enter all the data asked for in the "Sale of Business Property" section you'll be given the opportunity to report it as an installment sale.

[Redan54]

@Carl I meticulously did the math yesterday the long way and did the crazy allocation for the cost and sale expenses, took forever, then i realized the whole rental section doesn't even bother asking what the total price sold is, it only asks for the principal downpayment and payments made in 2019. 

then i got to the Installment Sales section and it seemed like i could've skipped all that if i did not indicate it was sold while in the Rental section but later indicated it was sold in Installment Sales area instead coz it seems like only in the standalone Installment Sale's section does it asks for both principle paid this year and overall total sale $. 

On the property profile section, I actually didn't chose "sold or disposed of in 2019" from the beginning coz the note section says "Do not check this box if the disposition was reported using the installment method, until the final year of payment." instead I chose "none of the above" and only indicated that it was sold/disposed of within the individual asset's profile, but i'll go back and change it to converted to personal use. 

regarding "date converted to personal use" is that the day it was sold, or day last renter moved out?

"Don't worry about the amount in COST OF LAND, as it's already included in COST" - So none of the assets will have a value in the Land Sales Price and Land Sales Expenses right?

[Carl]

So none of the assets will have a value in the Land Sales Price and Land Sales Expenses right?

That is incorrect. What I"m saying is that there's no depreciation on the land to be concerned with, since land is not a depreciable asset. But this I do know for a fact that I've proven to myself on more than one occasion.

- If you sell at a gain, then you *must* show a gain on every single asset listed. The amount of gain doesn't matter. So that gain can be $1 on some assets while $100,000 on another asset.

 - If you sell at a loss, then you *must* show a loss on all listed assets - even if that loss is only $1 on some assets, and $10,000 on other asset.

A gain is a gain. Period. A loss is a loss. Period. For tax purposes the amount of gain or loss on an individual asset just doesn't matter.

If you show a gain on some assets, yet a loss on others, then the TurboTax program will sometimes (not always) have a problem with doing things correctly on the 4797 and/or SCH D. It doesn't always work  out that way. But when it doesn't do things correctly you "DO* *NOT* get any kind of an error message or anything. You have no clue until sometime after you file, (could be years) that there was a screw up until you get the notice from the IRS.

Now how things work for an installment sale, I've not got a clue. I've never done an installment sale or even made an attempt to learn about them on the tax front. That's because from my first hand knowledge of others in the past who have done an installment sale, the sale has fallen through 100% of the time and the seller ends up either losing it all if they didn't do everything right on the legal front, or the seller ends up foreclosing on the property and repossessing it.

Based on my extremely small sample from my own personal knowledge of people whom I know who sold real estate on installment, here are the statistics.

 - Chances of foreclosing on the property in the first two years are above 90%.

 - Chances of foreclosing on the property in the first five years are 100%.

I personally have never known or met a person who saw an installment sale to full payoff.

In my opinion (and we all know what opinions are like!) If a bank or other licensed lending institution won't loan the buyer the money, then why would I? It makes no sense regardless of the seller's situation. But that's me and I don't condemn others for not thinking as I do. However, I do at least like to forewarn sellers of the risk and high probability that the buyer is going to renig on the sales contract/loan agreement at some point before the 5 year mark. If the seller is depending on that payment from the buyer to make their own mortgage payment, then they're really up a creek without a paddle.

[Redan54]

@Carli ended up putting $0 on land sales prices & expenses on all assets except for the House/Building asset, so I guess that is wrong then, and coz I had 100% into the actually property asset for all other assets. Is there some sort of percentage the land sales prices & expenses should be on these individual assets? I mean stuff like New Roof etc is going to supposed to have like 1% of the whole value of the asset allocated to land and 1% of the whole value of the asset?

and regarding "date converted to personal use" is that the day it was sold, or day last renter moved out?

[Carl]

Is there some sort of percentage the land sales prices & expenses should be on these individual assets?

No. If you sold at a gain you can pick numbers out of thin air, so long as two criteria are met in the end.

 - You show a gain on all assets.

 - The total gain on all assets equals your total gain on the sale.

If you entered a zero as a sale price for the land, I'm not sure but I don't think that will be a problem since there is no depreciation recapture on the land. But the only way to know for sure is to print out all the worksheets and calculation forms and follow the numbers.  Preliminary analysis on my part indicates a zero sales price on the land does not change your overall taxable gain.

One reason this matters on depreciated assets, is because recaptured depreciation is taxed anywhere from 15% to a maximum of 25% (even if your tax bracket is higher). So by not showing enough of a gain on the sale of a depreciated asset to "allow" for the recapture and subsequent taxing of the depreciation, it makes the math wrong and does not generate any errors or warnings.