Use Form 6252 to report a sale of property on the installment method. The form is used to report the sale in the year it takes place and to report payments received in later years. Also, if you sold property to a related person, you may have to file the form each year until the installment debt is paid off, whether or not you receive a payment in that year.taxmap/pubs/p537-003.htm#en_us_publink10001309
If you sold property to a related person during the year, complete lines 1 through 4 and Parts I, II, and III of Form 6252.
If you sold a marketable security to a related party after May 14, 1980, and before January 1, 1987, complete Form 6252 for each year of the installment agreement, even if you did not receive a payment. (After December 31, 1986, the installment method is not available for the sale of marketable securities.) Complete lines 1 through 4 each year. Complete Part II for any year in which you receive a payment. Complete Part III for each year except for the year in which you receive the final payment.
If you sold property other than a marketable security to a related party after May 14, 1980, complete Form 6252 for the year of the sale and for the 2 years after the year of sale, even if you did not receive a payment in those years. Complete lines 1 through 4. Complete Part II for each of the 2 years after the year of sale in which you receive a payment. Complete Part III for each of the 2 years after the year of the sale unless you received the final payment during the year.
If the related person to whom you sold your property disposes of it, you may have to immediately report the rest of your gain in Part III. See Sale and Later Disposition under Sale to a Related Person, earlier, for more information.taxmap/pubs/p537-003.htm#en_us_publink10001310
If you sell two or more assets in one installment sale, you may have to separately report the sale of each asset. The same is true if you sell all the assets of your business in one installment sale. See Single Sale of Several Assets and Sale of a Business, earlier.
If you have only a few sales to separately report, use a separate Form 6252 for each one. However, if you have to separately report the sale of multiple assets that you sold together, prepare only one Form 6252 and attach a schedule with all the information for each asset that is required by Form 6252. Complete Form 6252 by following the steps listed below.
- Answer the questions at the top of the form.
- In the year of sale, do not complete Part I. Instead, write "See attached schedule" in the margin.
- For Part II, enter the total for all the assets on lines 24, 25, and 26.
- For Part III, answer all the questions that apply. If none of the exceptions under question 29 apply, enter the totals on lines 35, 36, and 37 for the disposed assets.
If you are reporting payments from an installment sale as income in respect of a decedent or as a beneficiary of a trust, including a partial interest in such a sale, you may not be able to provide all the information asked for on Form 6252. To the extent possible, follow the instructions given above and provide as many details as possible in a statement attached to Form 6252.
For more information on how to complete Form 6252, see the form instructions.taxmap/pubs/p537-003.htm#en_us_publink10001312
The gain from Form 6252 is entered on Schedule D (Form 1040), Capital Gains and Losses, Form 4797, Sales of Business Property, or both. These forms were discussed earlier under Reporting Installment Sale Income.taxmap/pubs/p537-003.htm#en_us_publink10001313
Although the references in this publication are to the Schedule D for Form 1040, the rules discussed also apply to Schedule D for Forms 1041 (estates and trusts), 1065 (partnerships), 1120 or 1120-A (corporations), and 1120S (S corporations).taxmap/pubs/p537-003.htm#en_us_publink10001314
Form 4797 is used with estate and trust, partnership, corporation, and S corporation returns, as well as individual returns. taxmap/pubs/p537-003.htm#en_us_publink10001315
The following examples illustrate how to fill out Form 6252. Sample filled-in forms follow.taxmap/pubs/p537-003.htm#en_us_publink10001316
On November 1, 2008, Mark Moore sold a lot for $14,700, which included the outstanding balance on a loan. He had purchased the lot on February 17, 1997, for $2,650. He borrowed more on the lot than he paid for it. At the time of the sale, $6,500 remained outstanding on the loan. In the sales contract, the buyer agreed to assume the loan and pay Mark $200 a month (plus 7% interest) for 3 years. The buyer made a down payment of $1,000 on the sale and made a $242 payment in December, $42 of which was interest.
Mark fills out his 2008 Form 6252 as follows:taxmap/pubs/p537-003.htm#en_us_publink10001317
Mark enters a description of the lot sold.taxmap/pubs/p537-003.htm#en_us_publink10001318
Mark enters the date he acquired the lot and the date he sold it.taxmap/pubs/p537-003.htm#en_us_publink10001319
Because Mark sold the lot to Acme Design, his corporation, he checks the Yes box.taxmap/pubs/p537-003.htm#en_us_publink10001320
The property Mark sold was not a marketable security (such as stock or a bond). He checks the No box. He sold the lot to a related person, so he must complete Part III for 2008 and the next 2 years.taxmap/pubs/p537-003.htm#en_us_publink10001321
Mark uses this part of the form to figure the contract price and his gross profit on the sale.taxmap/pubs/p537-003.htm#en_us_publink10001322
Mark enters the selling price, $14,700. This includes the $1,000 down payment, the $7,200 (36 × $200) in monthly payments he is to receive, and the $6,500 loan the buyer assumes.taxmap/pubs/p537-003.htm#en_us_publink10001323
Mark enters the $6,500 in loans that the buyer assumes.taxmap/pubs/p537-003.htm#en_us_publink10001324
Mark subtracts line 6 from line 5 and enters the difference, $8,200. taxmap/pubs/p537-003.htm#en_us_publink10001325
He did not make any improvements to the lot, so Mark's basis at the time of the sale was the lot's cost of $2,650.taxmap/pubs/p537-003.htm#en_us_publink10001326
Mark did not take depreciation deductions on the lot (land is never depreciable). The amount on line 8 carries over to line 10.taxmap/pubs/p537-003.htm#en_us_publink10001327
Mark's only selling expenses were $150 in legal fees. If he had advertised the lot for sale, or paid commission on the sale, he would have included those amounts also.taxmap/pubs/p537-003.htm#en_us_publink10001328
No depreciation was claimed on the land, so Mark has no recapture of income.taxmap/pubs/p537-003.htm#en_us_publink10001329
Mark's installment sale basis is $2,800, the total of his adjusted basis in the property plus his selling expenses.taxmap/pubs/p537-003.htm#en_us_publink10001330
Mark subtracts line 13 from line 5 and enters the result, $11,900.taxmap/pubs/p537-003.htm#en_us_publink10001331
The property Mark sold was not his home. He carries the amount on line 14 to line 16. This is his gross profit on the sale.taxmap/pubs/p537-003.htm#en_us_publink10001332
Mark subtracts line 13 from line 6. The result, $3,700, is the amount by which the assumed loan is more than his installment sale basis in the property. This amount is treated as a payment in the year of sale on line 20.taxmap/pubs/p537-003.htm#en_us_publink10001333
The contract price is the sum of all payments Mark will receive on the sale. This includes the down payment and all installment payments he will receive (line 7). It also includes the payment figured on line 17.taxmap/pubs/p537-003.htm#en_us_publink10001334
In this part, Mark figures his installment sale income. For 2008, his installment sale income is composed of two parts.
- Any ordinary income from the recapture of depreciation.
- Any gain remaining after subtracting that ordinary income from the installment sale income.
Mark's gross profit percentage is 100%. This is the gross profit on line 16, $11,900, divided by the contract price on line 18, also $11,900.taxmap/pubs/p537-003.htm#en_us_publink10001336
Mark carries the amount he treats as a payment on line 17 ($3,700) to this line and it is added to the other payments he received in the year of sale.taxmap/pubs/p537-003.htm#en_us_publink10001337
At the time of the sale, Mark received a down payment of $1,000. In December 2008, he received his first monthly installment payment. The total payment was $242, consisting of $42 interest (one month's interest on $7,200 figured at 7% a year) and $200 principal. This is the only installment payment he received in 2008. He enters the total received during 2008, $1,200 ($1,000 + $200), on this line. He reports the $42 interest on Form 1040.taxmap/pubs/p537-003.htm#en_us_publink10001338
Mark enters $4,900, the sum of line 20 and line 21. This is the total of all payments he is considered to have received in 2008.taxmap/pubs/p537-003.htm#en_us_publink10001339
2008 is the year of sale, so Mark makes no entry here.taxmap/pubs/p537-003.htm#en_us_publink10001340
The gross profit percentage (line 19) is 100%. Therefore, the entire amount on line 22, $4,900, is installment sale income. Mark enters this amount on line 24.taxmap/pubs/p537-003.htm#en_us_publink10001341
The lot Mark sold was not depreciable property, so he does not have to recapture any depreciation deductions as ordinary gain. All of the installment sale income is long-term capital gain. He enters zero (-0-) on line 25. He carries the amount on line 26 to Schedule D (Form 1040) where it is included with other long-term capital gains.taxmap/pubs/p537-003.htm#en_us_publink10001342
Mark sold the lot to his corporation, a related person, so he must fill out this part. The property he sold was not a marketable security and he completes this part for 2008, 2009, and 2010.taxmap/pubs/p537-003.htm#en_us_publink10001343
Mark enters the name, address, and employer identification number of the corporation that bought the lot.taxmap/pubs/p537-003.htm#en_us_publink10001344
The corporation did not sell the lot in 2008. Mark checks the No box and he does not have to fill out the rest of Part III.taxmap/pubs/p537-003.htm#en_us_publink10001345
In December 2007, Cora Blue sold a painting she inherited in 1995. The buyer paid her $700 down and gave her an installment note for $3,800. The note calls for quarterly payments of $530 until the $3,800 debt is paid off. Each $530 payment includes interest figured at 10% a year on the outstanding debt. She received her first 4 payments on the note in 2008. The principal and interest she received in each payment is given in the table below:
|First||$ 95.00||$ 435.00|
Cora rounds off cents on her tax return. She reports $314 interest as ordinary income on Form 1040, line 8a. She completes Form 6252 as follows:taxmap/pubs/p537-003.htm#en_us_publink10001346
Cora states the property she sold was an oil painting.taxmap/pubs/p537-003.htm#en_us_publink10001347
She enters the date she acquired the painting and the date she sold it.taxmap/pubs/p537-003.htm#en_us_publink10001348
The buyer was not related to Cora. She checks the No box.taxmap/pubs/p537-003.htm#en_us_publink10001349
She checked No to question 3, so Cora does not have to answer this question or fill out Part III of the form.taxmap/pubs/p537-003.htm#en_us_publink10001350
Cora completed Part I of her Form 6252 for the year of sale, 2007. She does not fill it out for the remaining years of the installment sale.taxmap/pubs/p537-003.htm#en_us_publink10001351
This is the only part of Form 6252 that Cora fills out.taxmap/pubs/p537-003.htm#en_us_publink10001352
Cora figured a gross profit percentage of 22.7% on her 2007 Form 6252. She uses the same percentage on her 2008 Form 6252.taxmap/pubs/p537-003.htm#en_us_publink10001353
This is not the year of sale, so Cora enters zero on this line.taxmap/pubs/p537-003.htm#en_us_publink10001354
Cora enters the total amount (minus interest) that she received on the sale in 2008, $1,806.taxmap/pubs/p537-003.htm#en_us_publink10001355
The amount on line 21 carries over to line 22.taxmap/pubs/p537-003.htm#en_us_publink10001356
Before 2008, Cora received only the $700 down payment.taxmap/pubs/p537-003.htm#en_us_publink10001357
Cora multiplies the gross profit percentage of 22.7% (line 19), by the amount she was paid in 2008 (line 22), $1,806. The result, $410, is her installment sale income for 2008.taxmap/pubs/p537-003.htm#en_us_publink10001358
Cora did not use the painting in a business. It was not depreciable and the recapture rules do not apply. She enters zero (-0-) on line 25. The amount on line 24 carries over to line 26. Her gain is long-term capital gain. She carries the amount on line 26 to Schedule D (Form 1040), where it is included with other long-term capital gains.