Form 6252: Installment Sale Income is an IRS form designed to report income derived from the sale of real or personal property using the installment method. This occurs when a payment from the sale is received after the taxable year in which the sale was concluded. Notably, it excludes dispositions of personal property by individuals who are regularly in the business of selling that type of property, or sales to customers occurring in the ordinary scope of a taxpayer’s occupation, like farmland transactions.
An installment sale provides an advantageous way to defer income to future tax periods unless the taxpayer opts not to use the installment method.
Key Takeaways
- Form 6252 reports income from installment sales of real or personal property.
- The form is necessary if there’s recognized gain using the installment method.
- New legislation allows deferral of capital gains into a Qualified Opportunity Fund.
Who Can File Form 6252: Installment Sale Income?
Taxpayers who realize a gain on property through the installment method are required to use this form. However, if there is no gain on the sale, Form 6252 is unnecessary, even if payments extend into the next tax year. Instead, businesses should use Form 4797 to report such transactions.
Additionally, this form isn’t applicable to the sale of stock or securities within established markets, as they’re considered reportable in the year the sale takes place.
How to File Form 6252: Installment Sale Income
- Identification Details: Enter the taxpayer’s name and identification number (EIN for businesses or SSN for individuals).
- Property Information: Include detailed descriptions, date of acquisition, and date of sale.
- Calculate Gross Profit and Contract Price: Complete Part I for all years during the installment agreement.
- Installment Sale Income: Fill out Part II with installment sale income specifics.
- Related Party Sales Information: Only if relevant for the current tax year.
Special Considerations When Filing Form 6252
New rules, effective 2018, permit deferral of capital gains into a Qualified Opportunity Fund (QOF). Conditions include:
- Investment within 180 days.
- Elect deferrals using Form 8949, filed with your tax return.
- Investments must be an equity interest in the QOF.
Other Relevant Forms
Form 8949: Required if deferring any capital gains into a QOF. Originating from the 2017 Tax Cuts and Jobs Act, these funds encourage economic growth and job creation.
Filing an additional Form 8997 annually is mandatory for any taxpayer holding investment in a QOF.
For more detail and the official forms, please refer to the IRS website.
Related Terms: Installment Sale, Tax Year, Qualified Opportunity Fund, Capital Gains, Form 4797.
References
- IRS. “Form 6252”.
