owner financed land sale

[royalknights115]

I was given 3 acres of land by my parents in 1990.  I build a house and lived there until I sold in 2015.  A couple years prior to selling i split the property so that I had the 1 1/2 acres that my house was on and a 2 acre piece i could sell separate.  When I sold my house the buyer wanted the land as well.  He couldn't afford to add it into his mortgage so I financed it for for him.  I sold the land to him for $17k and he made regular payments over 4 years paying off the balance in 2019.  In 2015 i treated this as an installment loan showing the $17k selling price and $0 cost.  Each year i would report the payments and interest in my taxes.  Now that I'm getting ready to say it is paid in full I'm thinking I may have short changed myself.  My questions are as follows?

1.  Was there any way for me to show a "cost" or because it was given to me as part of a larger parcel did i do the right thing by reporting $0 cost?

2.  If there is a way to report cost - how should i go back and do this sale correctly?

3.  Was I wrong in reporting the sale information in year one versus waiting until it was paid off?  When i checked the box that 2019 was the final payment turbo tax made me enter this amount.  Will there be any repercussion from the IRS that it is showing up twice (once in 2015 and now in 2019)?

Thank you for reviewing my questions.

[Irene2805 · Accepted solution]

To answer your questions about the installment sale of your land:

1.  You may have acquired the property at no "cost" but you did have basis in the property--what it was worth when you acquired it.  Instead of entering zero cost, you should have entered the value of the 1-1/2 acres when you received it.  

2.  You could go back and amend your returns, starting with 2015 -- the year of the sale.  You were correct to treat it as an installment sale.  If you have the CD/Download version of TurboTax for those years, this should be easy to do. 

If you don't already have them, you would have to download them and  I'm not sure how cost effective that would be for a $17,000 sale.  You could also get the prior year forms from the IRS  website and fill them out manually:  https://www.irs.gov/forms-pubs/prior-year

3.   Since you reported it as an installment sale, you actually reported the sale once, on your 2015 return.  In subsequent years you reported the part of the sale price you received, plus any interest.  No problems with the IRS.

[Anonymous]

your basis in the land you were gifted would be the lower of your parents' basis or Fair Market Value on the date of the gift.  do you know what their basis was or the date they acquired it?   in 2015 when you sold the vacant land and your house, the land basis should have been allocated between the vacant land that was sold and the house with its land.  what did you use for the cost of the land for the house sale $0, 100% of parents' basis, something else?     to complicate matters 2015 is now a closed year.  so you can't amend 2015.  that leaves the question as to whether the % gain on the installment sale can be amended for 2016-2019.    sometimes it is better to let sleeping dogs lie.