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Ed Johnson
Ed Johnson, Tax Preparer
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I reamortized a seller-financed mortgage (I held the note)

Resolved Question:

I reamortized a seller-financed mortgage (I held the note) that was $12,000 in arrears. The new principle was the balance due + $12k. Do I fill out a new Form 6252 with in increased basis (old basis (a fraction of old mortgage due) + $12k) or is this handled some other way?
Submitted: 5 years ago.
Category: Tax
Expert:  Ed Johnson replied 5 years ago.

DearCustomer

 

Thank you for your question.

 

Is this a private sell where you are selling your own property?

 

Or are you in the business of making such loans?

Customer: replied 5 years ago.
Hi Ed, This was a private sell ten years ago, which I treated it as a business exchange to deduct my expenses. I bought 5 acres (which the owner financed), had it surveyed and subdivided, and sold each acre with a title company collecting the payments, and forwarding them to me less a monthly service fee. My original concept was to keep one acre, but I found something else in the mean time, so I sold all 5 acres. I haven't engaged in any further real estate business sells, and 2 of the 5 have paid off and been released. One account fell seriously into arrears, and I re-amoritized the loan, rolling the past-due payments (principle plus interest plus late fees) into the principle. The title company lists the interest and principle paid for the year, and lists the principle as negative (since the principle increased for the year). Turbotax doesn't like the negative principle on the Form 6252 "Installment Sale Income," and ignores the negative number on 6252 line 26 when transferring to Form 4797 line 10. So, I suspect there is some special way or ways to treat this re-amoritization, but I don't know how, or which would be advantageous. Thanks for your consultation on this. -Karl
Expert:  Ed Johnson replied 5 years ago.

DearCustomer

 

Thank you for getting back to me.

 

You need to refigure your basis using the worksheet "B" in the following publication. This is normally done when reducing the price after you have started, but it can also be used to make adjustments in your situation and in situations where a price was increased.

 

Try this and see if it works.

 

You may have to override TT, and if you do that, then TT may not accept the return for electronic filing. You may have to mail this return in.

Customer: replied 5 years ago.
Thanks. You say refigure the basis, and that makes sense to me. You say, "using the worksheet "B" in the following publication." But I don't see the name of the publication or a link in your post to "the following publication." Please let me know.

Over-riding turbo tax and filing paper is not an obstacle for me.
Expert:  Ed Johnson replied 5 years ago.

DearCustomer

 

Thanks for getting back to me. That was my error, sorry.

 

Here is the link to the form to use. Remember you are just using the form to figure the new base.

 

Work sheet B in this publication: http://www.irs.gov/pub/irs-pdf/p537.pdf

 

Ed Johnson, Tax Preparer
Category: Tax
Satisfied Customers: 10760
Experience: GPHR Cert; U.S. Treasury Tax Advocacy Panel appointee
Ed Johnson and other Tax Specialists are ready to help you
Customer: replied 5 years ago.
Thank-you. -Karl

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Ed Johnson
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