Question

Installment Sale Income - IRS Form 6252

Forum|Forum|6 years ago
February 9, 2020
4 replies
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In March 2018, I sold a rental property on the installment basis. For my 2018 return, Form 6252, I typed in the following values:

1) Selling price - Part I, Line 5

2) Mortgages, debts - Part I, Line 6

3) Basis of property sold - Part I, Line 8

4) Depreciation allowable - Part I, Line 9

5) Expenses of sale - Part I, Line 11

6) Gross profit percentage - Part II, Line 19

For my 2019 return, TurboTax copied over the gross profit percentage from 2018 but did not do so for the other fields that I entered. However, on the 2019 6252 form, I was able to enter manually the values for everything except the depreciation allowable field. The only way to enter a value for depreciation allowable field was to override the field.

The first question I have is why didn't TurboTax copy over from the 2018 the following? They were the same figures that need to be entered into Form 6252 for each year of the installment sale, so if Turbo Tax can copy over the gross profit percentage, which is the result of entering the selling price, mortgage value etc..., why couldn't it also copy over these other lines?

1) Selling price - Part I, Line 5

2) Mortgages, debts - Part I, Line 6

3) Basis of property sold - Part I, Line 8

4) Depreciation allowable - Part I, Line 9

5) Expenses of sale - Part I, Line 11

Finally, I hate overriding a field and manually entering a value since it almost always means that I've entered something wrong in TurboTax elsewhere. Does anyone have an idea what I might have done wrong to have to override Part I, Line 9, Depreciation allowable?

M

MAK70

The depreciation allowable should only be included in the first year- You must report any portion of the capital gain from the sale of depreciable assets that's ordinary income under the depreciation recapture rules in the year of the sale so it should not be overridden in subsequent years. Since this is applied to the first year of the Installment Sale, the other values are also adjusted accordingly.

R

richholladay

I was having a similar problem generating a correct Form 6252 without resorting to making changes on the form itself. I sold real estate in 2010 so TurboTax did not have access to data from my first year of sale. I eventually forced the program to yield correct numbers by entering the number from line 13 (rather than line 😎 from my original 2010 Form 6252 into TurboTax when it asked for the “cost or other basis of this property”. Line 13 is actually the original “cost” less “depreciation” plus “commissions and other expenses of sale”. TurboTax put this amount on lines 8, 10 and 13 of my 2019 6252, leaving depreciation (line 9) and cost of sale (line 11) entries blank. Was this the correct way to handle the problem? Can I file my taxes with the 6252 showing these numbers rather than the detail shown in 2010?

M

MAK70

Yes, the subsequent years do not include the depreciation and sales expense- rolling it into the basis.

D

desert5898Author

Thank you so much for having taken the time to reply my question about installment-sale income. I'm still confused though on how to proceed for TY2019. I looked at my 2018 Turbo Tax return and wonder whether it was done correctly.

On Form 6252, I completed the following:

1) Selling price - $245,750

2) Mortgages, debts - $119,700

3) Basis of property sold - $206,550

4) Depreciation allowable - $59,261

5) Expenses of sale - $147,289

6) Gross profit percentage - $3,110

There were also the gross profit of $95,171 and the contract price of $125,870, creating a gross-profit percentage of .7561. When the principal payments of $10,135 were multiplied by the gross-profit percentage of .7561, you got an installment-sale income of $7,663.

According to the Unrecaputured Section 1250 Gain Smart Worksheet, Turbo Tax took the total installment-sale gain of $7,663 and divided it into long-term capital gains of $532 (taxed at 0%, 15% or 20%) and unrecaptured Section 1250 gain of $7,131 (taxed at 25%).

Turbo Tax then took the unrecaptured Section 1250 gain of $7,131 and subtracted it from the total unrecaptured Section 1250 depreciation of $59,261 to arrive at the "Unrecaptured Section 1250 depreciation carryover to 2019," which is $52,130.

However, for the instructions for Form 6252, it states: "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."

On my 2018 return, though, Line 31 of Form 4797 and Line 12 of Form 6252 state $0.

So, I'm not clear why Turbo Tax created a taxable 1250 gain on only part ($7,131) of the total unrecaptured Section 1250 depreciation of $59,261 with a carryover to 2019 of the difference. Can you help me with this?

D

desert5898Author

I have a couple of corrections to my post below.

5) Expenses of sale - $3,110

6) Gross profit percentage - .7561

RobertG

First of all, the reason there is a carryover is that it's an installment sale. In an installment sale, you do not claim all of the income in the year of the sale; it is spread out. Thus, the Section 1250 recapture will also be over time.

Second, there is a difference between section 1250 unrecaptured depreciation and ordinary income recapture.

There is no ordinary income recapture (per Form 4797), because the depreciation of the rental is straight-line depreciation. No additional recapture is necessary, so Form 4797 line 31 will read $0 as will Form 6252 line 12.

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S

skeltonj

I've been trying since January with TurboTax to get Installment Sales fixed for 2020. We sold a rental in 2015 and it has worked perfectly every year until now. I enter the interest received and it populates the Schedule B correctly. However, I enter the principal received an NO forms are populated....no 6252, no 4797, no schedule D, nothing on Line 7, 1040 nor any amount on my state tax return. I use turbotax online premier. In our investigation, we realized 6252 was not generated in 2019, but was generated in previous years. I think this is the problem, that the database is trying to pull data off 2019 6252 and it is nowhere to be found. But I CANNOT get anyone at TurboTax to understand that , nor fix it!!!! I even tried to amend 2019, thinking it would generate a 6252, but the amendment didn't, so I cancelled the amendment. Now they're trying to tell me to pay for a CPA to see if I entered everything correctly. It's worked perfectly last 5 years!!! I believe the database function is written to look for the 2019 6252 and it is not there, but I can't get anyone at turbotax to understand that. And I can't get a refund! I was wondering if we are having similar issues????

R

ReeferSnaafer

Same thing happened to me. The rules changed so you have to fill out Part One each year now. I don't know what I sold the property for many years ago and Turbo Tax won't print out the forms or enter the principle on line 11 of Schedule D. Not sure how I fixed it last year. 😞

K

kab48

why is Turbo Tax program holding up filing my tax return because of form 6252? Turbo Tax program says form 6252 is not ready to file from IRS, but I can download form 6252 from IRS.gov?

J

JamesG1

Forms availability says that IRS form 6252 will be available on March 3, 2022.

IRS form 6252 is used to report income from an installment sale on the installment method. Generally, an installment sale is a disposition of property where at least one payment is received after the end of the tax year in which the disposition occurs.

[Edited 02/22/2022 6:35 PST]

@kab48

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