Form 6252 Installment Sale Income

Forum|Forum|1 year ago
March 8, 2025
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I started receiving income on an installment sale in 2018 and have filed form 6252 each year with the income for that year. This year, 2024, I received a large payment so that line 21 on the form, which is the payment received in the last year, now exceeds line 18, the contract price. Turbotax says this is an error which must be corrected, but I can't correct it if I put in my accurate income for the year. What do I do? Can I still use form 6252 or is that no longer applicable?

Not A Product Question

Best answer by DianeW777

Hi Diane,

Thanks for your comments. I have reviewed all the publications you cited, but none of them deal with the situation where the selling price is increased, only when it is reduced. The selling price reported on line 5 of Form 6252 was the selling price determined when the sale was made in 2018. The box on line 4 asking "Can the total selling price be determined by the close of the tax year in which such sale or other disposition occurs? is new to Form 6252 in 2024. In previous years those boxes were blanked out and line 4 said "Reserved for future use". Apparently the future has arrived, but the form has not accommodated to the future. It still asks for the selling price when the sale occurred i.e. in 2018 in my case. You suggest changing the selling price to the actual price, but for a contingent sale like mine, that actual price would change every year, since future payments, that are impossible to predict, would increase it each year. No where in any of the publications or instructions for Form 6252 does it say that line 21, payments received during year, cannot be greater than line 5, selling price. If this was prohibited you would think they would tell you to adjust the selling price, but this issue is never discussed. I think I have spent all the time on this subject that I can and am reaching the point of diminishing returns. Thanks again for your help

The confusion is understandable. I continue to advise to change the selling price each year to accommodate the appropriate taxable gain and gross profit percentage on the installment each year, even if you need to do some calculations on your own. It not a concern the selling price increases. The bottom line is to include the correct taxable gain each year on your tax return until the sale is complete.

I have experienced changes to my own installment sale previously, which was also a bit confusing when the price changed after the initial sale. I'm confident you can make the necessary changes in sales price to apply the correct gross profit percentage, thereby taxing the correct gain.

If you like you can use the link below to seek a TurboTax verified tax pro

Find a TurboTax Verified Tax Professional

Mike9241

For this to happen you would have had to receive more in sales proceeds than what was reported originally. Am I correct? If so was this additional principal payment a contingent payment?

other possibilities

1) misreporting the principal received in prior years. did you separate the intent included from the principal?

2) a Turbotax error.

if contingent payments were the cause, there are specific regulations for how to account for them in determining each year's reportable gain

I strongly recommend you seek professional help.

EMM42Author

Hi, Mke,

Thanks for your prompt response. You are correct that I received more in sales proceeds than the contract price originally recorded. Up till 2023 my payments from this sale did not exceed the contract price and I successfully used Turbotax to file my taxes using Form 6252. However, last year, 2024, the payments I received were almost double the original contract price. All of the payments I received including the ones in 2024 were contingent payments. I don't believe there were any errors in reporting. Since Turbotax will not accept a number on line 21 of Form 6252 that is greater than the number on line 18, the contract price, I cannot proceed further in the program to determine my taxes. If there is no workaround for this, your comment implies that I cannot use Turbotax to file my taxes in 2024 and that I have to have a tax accountant prepare my taxes for 2024. Is this the correct conclusion from your comments. Apparently, Turbotax cannot handle this situation. Thanks for your help.

DianeW777

It depends. It may not be a common occurrence however a change in sales price is normal. You can determine the new gross profit percentage by adjusting the sales price for your installment sale.

Contingent Payment Sale (IRS Publication 537)

A contingent payment sale is one in which the total selling price can’t be determined by the end of the tax year of sale. This happens, for example, if you sell your business and the selling price includes a percentage of its profits in future years.

If the selling price can’t be determined by the end of the tax year in which the sale or other disposition occurs, you must use different rules to figure the contract price and the gross profit percentage than those you use for an installment sale with a fixed selling price.

For rules on using the installment method for a contingent payment sale, see Regulations section 15a.453-1(c).

When you complete the installment sale section, change the selling price to the actual price once you redetermine your gross profit percentage, taking into account the income/profit/percentage you did report in the prior years.

If you use TurboTax Desktop, you can manually change the numbers by going to Forms. If you would rather seek a tax accountant you can do that. The links will provide additional guidance as well.