This form may be of particular value for taxpayers who sell personal property or real estate property with a long-term payment plan, where part of the income comes in each year with no taxes due that year because some of the money was paid in prior years.
In such cases, Form 6252 should be filled out each year as installment payments are received until it shows all gains have been accounted for. In addition, this form can also be used to calculate losses related to installment sales that may not otherwise qualify as capital losses.
Reporting information on property sales via installment method accurately is essential since mistakes could result in interest and penalty charges. By filling out Form 6252 when filing taxes, taxpayers who have received at least one payment via an installment agreement during the tax year can report income and ensure that the sale will be properly accounted for.
Form 6252 contains several lines that must be filled out to calculate the tax implications of an installment sale on real or personal property. A breakdown of these sections is provided below as guidance for accomplishing this form.
Make sure to complete other relevant forms, such as Form 8949: Sales and Other Dispositions of Capital Assets if you are opting to defer any capital gains into a Qualified Opportunity Fund.
In addition, you may also need to include any other reports related to the installment sale, such as a copy of the contract and its addendums. There is also space for you to report your total taxable income from all sources so that you can accurately report your total taxes due for the year.
Part III requires taxpayer’s information regarding the transfer of property between related parties such as a parent-child relationship, business partners, etc., which may be subject to special tax treatment under Internal Revenue Code (IRC) Section 453B.
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