Selling Rental Property on Contract

Forum|Forum|2 years ago
June 13, 2023
2 replies
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I'm selling a rental property on contract. 1st year of contract is this year. Nice down payment and 5.5% interest, with monthly payments. Balloon in 4 years. Per TT, in the SOLD section it says don't mark as sold if using installment method. Only mark SOLD in the final year. That's 4 years from now.

However, in the asset/Depreciation section, it specifically asks if I'm using the installment method. It then goes thru several questions.

So, the question is: How/when do I report the sale?

TurboTax Home & Biz Windows

Critter-3

Only mark SOLD in the final year. NO ... it was sold on an installment so it will be reported as such each and every tax year until it is paid off on the form 6252 ... please follow the interview to report it as such.

ONLY enter the sale in the rental asset section ... do NOT also enter it again in the business sales section.

leisurelarAuthor

In the Assets section, it asked when I disposed of the house. Since I'm selling over a 4 year period, I've not technically "disposed" of it until 2027. Do I enter 2023 this year and 2023 next year...?

Also, I presume the monthly payments will be entered in the Rents section. Yes?

Critter-3

OK ... did you or did you not sell the home and hold a mortgage or have a contract to recieve the payments over more than one tax year ( aka installment sale reported on form 6252). If you did then you DID sell the property in 2022 even if all the payments will not happen for a few years, the new owners are now responsible for the RE taxes and insurance not you. They must make the payments to you or you can reposess the property since you are "holding paper" on the property. If you did not set this up correctly then please seek local professional assistance to get the contract done right.

leisurelarAuthor

Still need answers please

Mike9241

you will be reporting on the installment basis which allows gain to be reported in proportion to proceeds received. form 6252. as you are going through the interview process for the property you will come to a page which "Your property assets" Turbotax does not allow for mass disposition of the assets so sales info must be enter for each. for each asset listed click the edit button. then you'll come to a page that asks to tell more about the asset. check item was sold and date of sale. eventually you'll come to the place to enter the sales amounts.

later you'll come to a page which asks if you want to use the installment method. click yes. answer the questions that follow.

your OK if all you had was depreciable real property and land. that's handled as one item provided the land cost was properly included un the building when you acquired the property. any subsequent improvement must be handled separately by going through the above steps for it. If you don't do this the tax basis of this asset will not be reflected in the reported gain resulting in overstatement. you must allocate proceeds among the various assets entered.

Critter-3

You DID SELL the property and you are holding a NOTE on the property (like a mortgage) where you will get payments over more than one tax year ( consisiting of interest and principal). So in the program you will indicate you SOLD the property and choose to report it EITHER as an installment sale form 6252 or in full in the year of sale (even if you will not get all the payments in the current tax year). Look at the options and pick the one that works best for you. If you still need help I highly recommend you seek professional assistance to get this done correctly.