Definition

An installment sale is reported on Form 6252:

"Generally, an installment sale is a disposition of property where at least one payment is received after the end of the tax year in which the disposition occurs. Ordinarily, an installment sale does not include a disposition of personal property by a person who regularly sells or otherwise disposes of personal property of the same type, or a disposition of real property which is held by the taxpayer for sale to customers in the ordinary course of the taxpayer's trade or business. However, gain on some dispositions by dealers in real property or farmers who dispose of any property used or produced in the trade or business of farming may be reported on the installment method."

Data Entry

The 6252 screen is broken into two tabs. The first tab is for Form 6252 Part 1 and Part II, and contains both the current and prior year selling information. A second tab for Part III allows you to enter information regarding a sale to a related party.

Watch the video Installment Sale for a demonstration.

Current Year Installment Sale

To enter an installment sale for an asset that is already recorded on the 4562 screen, fill out the following fields in the If Sold section:

• Date Sold

• Sale Price

• Expense of Sale

• Installment Sale MFC

  • For example, to indicate the first installment sale on the return, enter a MFC of 1.

• Mark any other check boxes that apply (optional).

If the asset and sale is recorded on the 4797 screen instead of the 4562 screen, complete the 4797 screen as needed, then enter an Installment Sale MFC.

After completing the 4562 or 4797 screen as above, go to the 6252 screen and make the following entries on the Part I/Part II tab:

• Enter Description of property (optional; if left blank, it defaults to the 4562 description).

• Answer question 3: Was the property sold to a related party after May 14, 1980?

  • If yes, also answer question 4 and complete the Part III tab.

• Under the Current Year Column enter:

  • Interest

    • Carries to the Schedule B as interest income

  • Principal

Prior Year Installment Sale

If completing the 6252 screen to record income received in the current year for a prior year installment sale, you must complete the following fields on the 6252 screen to generate Form 6252 with the needed data. No entry on the 4562 or 4797 screens is required.

Make all the required entries on the 6252 screen. Details of the data entry fields are included below.

• Description of property

• Answer question 3: Was the property sold to a related party after May 14, 1980?

  • If yes, also answer question 4 and complete Part III on the Part III tab

• Under the Current Year Column enter:

  • Interest

    • Carries to the Schedule B as interest income

  • Principal

• Under the Prior Years Column enter:

  • Interest: Enter the total of all interest received in prior years

  • Principal: Enter the total of all principal received in prior years

• Final year of installment sale check box (ONLY if this is the final year)

• 2a Date acquired

• 2b Date sold

• 6 Seller’s debts assumed by buyer (optional, only if applicable)

• 15 Home sale excluded gain (optional, only if applicable).

• 19 Gross profit percentage

• Regular Tax

• AMT (if applicable)

Property Repossessed

If an asset was sold using the installment sale method, and then repossessed by the seller, the preparer must determine if there is a gain or loss, what type of gain/loss occurred (ordinary or capital), and what entries must be made to report that event on the return. Possible entry points include the 4797 and 8949 screens. Drake Tax does not produce any worksheets related to this calculation; see Publication 537 for details.

Group Sale Installment Sale

See Drake Tax - Group Sale Installment Sale for detailed steps.