Seller financed mortgage

[David02360]

My LLC sold a rental unit and took back a mortgage on the property. This is not the usual business of the LLC. How do I report this on my 1065 and how do I carry over the Loss/Gain to my personal tax

[DaveF1006]

This sounds like an installment sale or a seller financed mortgage. Here is how to report in your Turbo Tax business product.

1. Go to federal taxes>rental real estate
2. Dispose of Business Property
3. Business Property Assets
4. Begin answering the questions
5. As you proceed through the interview, it will will ask how you disposed of the asset.  Here you will say sold.  If the money received was more than the basis of the property, then you can answer the question if this an installment sale and then answer the series of questions the follow. One of the question that will be asked is how much mortgage was assumed.
6. Now once everything is said and done, the income will appear on each partner's K1 of their share of the gain/loss. This appears in Part 3, line 1 as ordinary income or loss in each K1.

[adamcoletta]

What if the buyer didn't assume any mortgage (because there wasn't one) but the seller offered the buyer a mortgage, filed with the county, etc.  Where do I enter that Mortgage and interest I received from it?

[Vanessa A]

You would enter this as an installment sale.  

To enter this sale in TurboTax you will select the following:

1. Federal
2. Income and Wages
3. Installment Sales Under Miscellaneous Income
4. Walk through and enter all of the information for the entire property
5. Enter the payments received in 2023 and enter the amount for interest received and hit continue.
6. TurboTax will do the calculations from there

If this was your primary home and you want to exclude some of the capital gains from your income, you can opt out of the installment sales method and report the entire sale on your return this year.  You would then just report the interest you receive  for the mortgage annually on your return as interest income. 

Installment sales

Opting out of Installment Sales

[Kanepete]

My wife and I have a real estate partnership LLC and we file form 1065.  We sold some real estate in an installment sale and have received interest payments from the buyer.  We are trying to figure out where we report this interest income on the Form 1065.  Our current "guess" right now is to report it on line 5 (interest income) on Schedule K.  Can anyone confirm this or advise on another way of reporting the income?

[David02360]

Had the same problem as I sold a property in 2023 taking back some of the mortgage. I just added the interest received to Line 7 of form 1065 and titled it mortgage interest. 

[Mike9241]

you should be using form 6252 to report the installment sale unless you want to opt-out. there is a line in the 6252 interview or forms mode to enter the interest income received in 2023. the interest is investment interest so if you don't use the 6252 the interest goes on line 5 of schedule K.  Not line 7 of page 1

[Kanepete]

Yes, we are using form 6252 and went through the TurboTax interview mode. We cannot find anywhere on that form to report interest. In several places and in the form instructions it clearly states to not report interest here (line 5, 31, 23).