Ten Minutes with Griffin, Episode 146: IRS Form 6252: Reporting Installment Sale Income
When a seller carries a note on the sale of property, and installments are received in a later year (after the year of sale), the IRS allows you in some cases to proportionately spread your taxable gain and ordinary income across each installment to avoid phantom income issues. To determine the taxable amounts, for each sold asset, IRS Form 6252 is used to determine the gross profit percentage. This Form also shows some (but not all) of the disqualifiers for installment sale reporting, such as certain sales to related parties. In this presentation, I discuss the basics of completing Form 6252 - when is it required, how is it used, and what are some less-than-obvious issues to note?