K-1 1120s for Company Sold Using Deferred Payments Please Help

[thecolonel61]

Received our k-1 1120-s and form 6252 for our company we sold in December. The buyers gave us a lump sum payment of half and will be making monthly installments for 3 years for the balance. Box 17 has the normal V,AC,AJ and then this nasty "N" for the deferred payments that we have to add manually to "Other Taxes" as well. I have done further reading on the IRS website and am more confused than when I started. Hypothetically my share of the deferred obligation is $200K. What amounts do I enter for the N in the walk through as well as in the "Other Taxes" on Schedule 2? Thank you

[thecolonel61]

A little more info. We still have our S-Corp. The monthly payment from the buyer are being sent to the company at PO Box and then one of our officers (sister) is sending us a check for our share each month for the 3 years. 

[PatriciaV]

Enter the information for Form 1120S Schedule K-1 Box 17 Code N as it appears, including the amount of interest due. On the next screen, TurboTax will provide generic instructions on how to enter Code N, which is essentially following whatever guidance is provided with your K-1.

The IRS Instructions for Form 1120S Schedule K-1 Box 17 Code N say to report this interest on Schedule 2 (Form 1040) Line 15. Search for "Other Taxes" and enter the deferred interest for Section 453A(c), if applicable.

In TurboTax, you will need to report this as an Installment sale, using the info provided by the S-Corp. Be sure you indicate this was used in a business and link it to the S-Corp K-1. This will generate Form 6252. You may need to access Form 6252 using Forms Mode to answer additional questions not included in the interview.

However, you may need the assistance of the company that sent the K-1 to enter this properly so that the deferred interest carries over to Schedule 2. This public forum is not the best resource in this case. You might also consider using TurboTax Live, which allows a tax expert to work with you on these entries.

[edited 3/20/2025 | 2:46 pm PDT]

[thecolonel61]

Since no interest, deferred or otherwise was paid in 2024, should there be any interest to report this year. The firm that purchased us paid a down payment in december 2024 and didn't make an installment payment that included interest until until Feb 2025. So would I actually have interest to report for 2024? I don't pay the tax on that in advance do I?

[PatriciaV]

You are correct. If you weren't paid any interest on the installment sale during the current tax year, you would have no interest income to report.