Drake Tax – 1041 Seller-Provided Financing

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Article #: 19049

Seller-Provided Financing

If the estate or trust claims an interest deduction for qualified residence interest paid on seller-provided financing, the IRS requires an attachment with the seller’s name, address, and taxpayer identification number. In Drake Tax, use screen 5, screen PAID, and screen INT as described below. For a list of related 1041 screens, see Drake Tax – Federal 1041: Screen List (KB 20053).

Qualified residence interest paid (screen PAID)

To enter seller information for the qualified residence interest deduction:

  1. Open screen 5 (Form 1041, page 3, Other Information).
  2. On line 5, click the Paid link to open the Qualified Residence Interest Paid on Seller-financed Mortgage screen (screen PAID).

You can also open screen PAID from the Income tab of the Data Entry Menu.

Screen PAID accepts information for up to three sellers. After you enter seller data on screen PAID:

  • Form 1041, page 3, Other Information, line 5 shows an indicator in the Yes column.
  • View/Print mode includes a statement with the seller information required by the IRS.

Seller-financed mortgage interest received (screen INT)

If the estate or trust received seller-financed mortgage interest (interest income), open screen INT. At the top of the screen, mark the Seller-financed mortgage check box, then complete the Payer Information section.

Installment sale (screen 6252)

To enter information on an installment sale related to seller-provided financing, click the 6252 link on line 5 of screen 5. For general Form 6252 data entry steps, see Drake Tax – Installment Sale Definition (KB 10457).