How to enter an installment sale of a Rental property, which was sold in a prior year (2017 not using turbo tax) How do I enter the installment sale in Turbo Tax?

Forum|Forum|5 years ago
March 1, 2021
1 reply
0 views

I am trying to enter an installment sale for a rental property I sold in 2017. I had an accountant do the last several years of returns, and would like to do them myself now.

When I enter this using installment sales, it doesn't ask for depreciation, the only way I can get the gross profit margin correct is to subtract the depreciation. When the form 6252 is populated, the info in Part 1 is not the same as the year of sale, I am able to correct the fields to match the year of sale. The "big" problem is the amount from line 26 should be transferred to form 4797 and Schedule D line 19 (Unrecaptured Section 1250 Gain Worksheet), but it is not transferred. It is using the line 20 Qualified Dividends and Capital Gain Tax Worksheet, which is incorrect. I need to recapture the 1250 gains up to 25% to the amount of my depreciation, after that then the remaining gain is at the Qualified Dividends and Capital Gain rates. How do you get this corrected? I looked at the 1250 Unrecaptured Section 1250 Gain Worksheet and it is blank. I can add the amount but I have to override it. I'm told you cannot override things in Turbo Tax, if you do you can't e-file. I am using the Desktop CD download Home & Business.

Appreciate any help!

TurboTax Home & Biz Windows

gloriah5200

An installment sale occurring in a prior year is filed on IRS Form 6252 providing all information on the sale in order to calculate the gross profit percentage to be used in later years.

In the years after the initial year of sale, then the gross profit % is used against the principal received during the year and the interest income received during the year is reported as income.

For additional information, please refer to the following link:

IRS Form 6252 and Instructions for Installment Sale

Any ordinary income recapture under section 1245 or 1250 (including sections 179 and 291) is fully taxable in the year of sale even if no payments were received.

To figure the recapture amount, complete Form 4797, Part III.

The ordinary income recapture is the amount on line 31 of Form 4797. Enter it on line 12 of Form 6252 and also on line 13 of Form 4797.

Don’t enter any gain for this property on line 32 of Form 4797.

If you used Form 4797 only to figure the recapture amount on line 12 of Form 6252, enter “N/A” on line 32 of Form 4797. Partnerships and S corporations and their partners and shareholders, see the Instructions for Form 4797.

tj-21Author

Employee

Gloria,

I understand everything you said, except that on a 1250 property that used Straight line depreciation there is no recapture in the year of sale when using the installment method. Each year the amount on line 26 of the form 6252 is applied to the 1250 unrecaptured Gain until it is fully used(deprecitation) up then it goes to the capital gains rates.

My main issue/concern is by using the installment sale, as instructed, it is not reporting the gain under Schedule D line 19. This is incorrect, the 1250 unrecaptured gain worksheet is blank.

If there is another way to add the installment sale in turbo tax please advise.

ReneeM7122

Depreciation recapture is assessed when the sale price of an asset exceeds the tax basis or adjusted cost basis. The difference between these figures is thus "recaptured" by reporting it as ordinary income. Depreciation recapture is reported on Internal Revenue Service (IRS) Form 4797.

To account for the recapture, you should incorporate Form 4797, sale of business property to your return.

To add Form 4797:

Search for 4797, sale of business property and click the Jump to link.
On the Any Other Property Sales? screen, select the first checkbox and click Continue.
Follow the instructions to complete the form.

@tj-21