Installment sale of rental property. Sold at loss.

Forum|Forum|2 years ago
April 23, 2024
1 reply
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Client has many installment sales (6252) over the years and never any issue because all of them were sold at a gain. But now he has sold one at a loss, and software states when I try to link rental assets to 6252: "form 6252 link should be blank. Sale does not qualify for the installment method because asset sold at loss." the entire amount of loss flows to form 4797, Part I (even though client will receive payments in future). Is this correct? If so, then in future no loss will be deducted for "principal" portion of installment payments received, and interest income will be reported as received each year in future? is this correct, or am I missing something? Thanks a million.

ProSeries Professional

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Best answer by rbynaker

Yeah, installment sales are a "taxpayer friendly" provision to defer taxable gains. Take the loss up front (and then potentially make an adjustment later if the taxpayer needs to repo). Interest will be taxable as it comes in.

rbynakerAnswer

Level 13

Yeah, installment sales are a "taxpayer friendly" provision to defer taxable gains. Take the loss up front (and then potentially make an adjustment later if the taxpayer needs to repo). Interest will be taxable as it comes in.