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Hello, I'm Robin. Welcome to JustAnswer. I'm reviewing your question now and typing up my reply. I'll post that in just a few moments.
If you choose to show as installment sale you do not lose the IRC 121 for exclusion of gain ($500k that you mentioned). To figure your gross profit, subtract your adjusted basis for installment sale purposes from the selling price. If the property you sold was your home, subtract from the gross profit any gain you can exclude.
You are still allowed the exclusion of gain.
You can opt out of reporting as installment, report the sale, use your exclusion, and report the interest each year as taxable.
You can do it either way (installment reporting or in the year of agreement report sale in full) but you do not use your exclusion of gain.
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You are most welcome.
It is important for you to know that you do not give up the exclusion which ever way you choose to handle the sale.
A positive 5 star rating is appreciated so I get credit for the response.