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Lev, Tax Advisor
Category: Tax
Satisfied Customers: 28081
Experience:  Taxes, Immigration, Labor Relations
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I sold one of my rental properties and am carrying the loan

Customer Question

I sold one of my rental properties and am carrying the loan for the buyer. The original cost was $29000.00. I purchased the house on 5-7-2001 and the loan to the buyer originated on 2-23-2015. The loan amount is $30,465.00. I received payments monthly for $300.00. The total amount received was $2999.10 which includes interest of $1878.00. The closing costs were $1565.99 and depreciation claimed in prior years was $12260.00. Over the years I made improvements to the house at a cost of $4456.00. How do I handle this sale on my tax return?
Submitted: 6 months ago.
Category: Tax
Expert:  Lev replied 6 months ago.
An installment sale is a sale of property where you will receive at least one payment after the tax year in which the sale occurs. You are required to report gain on an installment sale under the installment method unless you "elect out" on or before the due date for filing your tax return (including extensions) for the year of the sale. You may elect out by reporting all the gain as income in the year of the sale on Form 4797, Sales of Business Property
Expert:  Lev replied 6 months ago.
If you do not elect out - under the installment method, you include in income each year only part of the gain you receive, or are considered to have received. You do not include in income the part of the payment that is a return of your basis in the property. Use Form 6252 , Installment Sale Income, to report an installment sale in the year the sale occurs and for each year you receive an installment payment. You will need to file Form 1040 , U.S. Individual Income Tax Return, and may need to attach Form 4797 , Sales of Business Property.You must also include in income any interest as ordinary income.Let me know if you need any help with reporting.,.I appreciate if you take a moment to rate the answer.Experts are ONLY credited when answers are rated positively.If you still have any doubts, need clarification - please be sure to ask.I am here to help you with all tax related issues.

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