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I sold a rental property holding the mortgage but will not…

I sold a rental...

I sold a rental property holding the mortgage but will not receive any payment for about 1 year. how do i file the sale of this property?

Accountant's Assistant: The Accountant will know how to help. Please tell me more, so we can help you best.

Sold rental property to a developer who was demolishing existing building and erecting 3 houses on property. terms were $5000 deposit and then 1/3 of remaining sales price would be paid when first house is sold and then 1/3 when 2nd house is sold and final 1/3 when last house is sold. Settlement day was 6-10-17. No additional money has been paid to me yet. How do I file this on my 2017 tax return?

Accountant's Assistant: Is there anything else important you think the Accountant should know?

Just that purchaser has told me that all houses may be sold in the next few months.

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Answered in 1 minute by:
3/22/2018
Lane
Lane, JD, CFP, MBA, CRPS
Category: Tax
Satisfied Customers: 14,656
Experience: Law Degree, specialization in Tax Law and Corporate Law, CFP and MBA, Providing Financial & Tax advice since 1986
Verified

Hi. …. My name’s Lane,

I hold a law degree (J.D.), with concentration in Tax Law, Estate law & Corporate law, an MBA in finance, a BBA, and CFP & CRPS (Chartered Retirement Plans Specialist) designations, as well - I’ve been providing financial, Social Security/Medicare, estate, corporate, non-profit, and tax advice, to clients on three continents, since 1986.

I’m reading your question now.

Bear with me a moment while I type up my response.

….

Then if you have further questions we can go from there.

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This is an installment sale.

...

An installment sale, for tax purposes, is the sale of property paid for by installment payments that span more than one tax year.

...

The installment method of reporting taxes was enacted by Congress so that taxpayers can pay taxes on the sale or other disposition of property over time, when the payments from an installment sale are actually received.

...

Each payment you receive (better said, each total amount of payments during a tax year) are treated as (1) part interest (either your actual rate or the federal rate is imputed if you don't have interest in your agreement) (2) part gain, and (3) part return of basis.

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Customer reply replied 3 months ago
The only money I received to date for sale of this property was the $5000 that I received at settlement on 6-10-17. When I file taxes for 2017, does that mean I only have to declare that amount for sale of the property for 2017?

You only declare a PART of that money; one part capital gain, one part interest , one part non-taxable return of basis

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When reporting an installment payment, both interest and the gain on the sale must be reported. There is no interest on the down payment, but each later installment payment must consist of at least some interest.

...

And as I mentioned, an installment sales contract that does not stipulate a minimum interest rate may have to calculate unstated interest.

...

Form 6252 is where this is calcculated

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Customer reply replied 3 months ago
Thank you.

You're very welcome ... Your positive rating … (by using those the stars or faces on your screen, and then clicking “submit”) …is thanks enough!

That's the only way I'll be compensated by JustAnswer for the work here

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Thank you,

Lane

Lane
Lane, JD, CFP, MBA, CRPS
Category: Tax
Satisfied Customers: 14,656
Experience: Law Degree, specialization in Tax Law and Corporate Law, CFP and MBA, Providing Financial & Tax advice since 1986
Verified
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