5.21 Tax Advantage of Installment Sales
If you sell property at a gain in 2012 and you will receive one or more payments in a later year or years, you may use the installment method to defer tax unless the property is publicly traded securities or you are a dealer of the property sold. If you report the sale as an installment sale on Form 6252, your profit is taxed as installments are received. You may elect not to use the installment method if you want to report the entire profit in the year of sale; see Example 1 below and 5.23.
Losses may not be deferred under the installment method.
Filing Instruction
How the installment method works.
For each year you receive installment payments, report the allocable gain for that year on Form 6252. Installment income from the sale of a capital asset is then transferred to Schedule D. If your gain in the year of sale is long-term capital gain, gain in later years is also long term; short-term treatment in the year of sale applies also to later years. Interest payments you receive on the deferred sale installments are reported with your other interest income on Form 1040, not on Form 6252.
Get J.K. Lasser's Your Income Tax 2013: For Preparing Your 2012 Tax Return now with the O’Reilly learning platform.
O’Reilly members experience books, live events, courses curated by job role, and more from O’Reilly and nearly 200 top publishers.
