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Publication 537

Reporting an Installment Sale(p15)


Form 6252.(p15)

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.

Which parts to complete.(p15)

Which part to complete depends on whether you are filing the form for the year of sale or a later year.
Year of sale.(p15)
Complete lines 1 through 4, Part I, and Part II. If you sold property to a related party during the year, also complete Part III.
Later years.(p15)
Complete lines 1 through 4 and Part II for any year in which you receive a payment from an installment sale.
Related person.(p15)
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 1987, complete Form 6252 for each year of the installment agreement, even if you did not receive a payment. (After 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, earlier, for more information.
Several assets.(p15)
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 required information for each asset. Complete Form 6252 by following the steps listed below.
  1. Answer the questions at the top of the form.
  2. In the year of sale, do not complete Part I. Instead, write "See attached schedule" in the margin.
  3. For Part II, enter the total for all the assets on lines 24, 25, and 26.
  4. 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.
Special situations.(p15)
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.

Other forms.(p15)

The gain from Form 6252 is entered on Schedule D (Form 1040), Form 4797, or both.
Schedule D (Form 1040).(p15)
Enter the gain figured on Form 6252 (line 26) for personal-use property (capital assets) on Schedule D (Form 1040), as a short-term gain (line 4) or long-term gain (line 11). If your gain from the installment sale qualifies for long-term capital gain treatment in the year of sale, it will continue to qualify in later tax years. Your gain is long-term if you owned the property for more than 1 year when you sold it.
Although the references in this publication are to the Schedule D for Form 1040, the rules discussed also apply to Schedule D (Form 1041), Schedule D (Form 1065), Schedule D (Form 1120), and Schedule D (Form 1120S).
Form 4797.(p16)
An installment sale of property used in your business or that earns rent or royalty income may result in a capital gain, an ordinary gain, or both. All or part of any gain from the disposition of the property may be ordinary gain from depreciation recapture. For trade or business property held for more than 1 year, enter the amount from line 26 of Form 6252 on Form 4797, line 4. If the property was held 1 year or less or you have an ordinary gain from the sale of a noncapital asset (even if the holding period is more than 1 year), enter this amount on Form 4797, line 10, and write "From Form 6252."

Sale of your home.(p16)

If you sell your home, you may be able to exclude all or part of the gain on the sale. See Publication 523 for information about excluding the gain. If the sale is an installment sale, any gain you exclude is not included in gross profit when figuring your gross profit percentage.
Seller-financed mortgage.(p16)
If you finance the sale of your home to an individual, both you and the buyer may have to follow special reporting procedures.
When you report interest income received from a buyer who uses the property as a personal residence, write the buyer's name, address, and social security number (SSN) on line 1 of Schedule B (Form 1040A or 1040).
When deducting the mortgage interest, the buyer must write your name, address, and SSN on line 11 of Schedule A (Form 1040).
If either person fails to include the other person's SSN, a penalty will be assessed.