Additional Expense in Final year of Installment Sale

[TKTax]

I have an additional expense in the final year of my client's installment sale of rental property. How can I properly show this? Can I just reduce the amount of payment received by this amount? I don't see a place on the 6252 input for for this.

[ILLMAS]

Selling expenses.   Selling expenses relate to the sale of the property. They include commissions, attorney fees, and any other expenses paid on the sale. Selling expenses are added to the basis of the sold property.

[kcjenkins]

You adjust the BASIS, not the income received.  Same net result, but does not distort the actual flow of money.

[easytax]

While discussing Installment Sale,  Usually not a problem and probably not now either --- BUT --- I would like to be sure...

Client sales personal  home to son (installment sale, decent price, etc. no problems) and goes "on road" traveling. 

Client makes no taxable money on sale and will only have interest to report for future years.

All proceeds of sale being reported on sch D for 2015 and exempt from income taxes (both state and federal). Also filing the installment sale form.

Is this OK? sch D completes the sale (again, no taxable money now or in future, it will only be interest received each year). The installment sale form, just to show it is an installment sale but with no future payments for tax purposes as all reported in 2015 (year of sale).

       Should I just file the sch D?  Am I thinking this incorrectly?     Appreciate the comments, Thanks.

[kcjenkins]

I would just file the Sch D, you don't need the installment sale form when you file the entire amount on the D.  

[Randall]

On ‎2‎/‎25‎/‎2016 at 0:27 PM, ILLMAS said:

Selling expenses.   Selling expenses relate to the sale of the property. They include commissions, attorney fees, and any other expenses paid on the sale. Selling expenses are added to the basis of the sold property.

 

On ‎2‎/‎25‎/‎2016 at 2:43 PM, kcjenkins said:

You adjust the BASIS, not the income received.  Same net result, but does not distort the actual flow of money.

 

But how is the basis adjusted in ATX in the final year or a year after the first year?  I have an installment sale for 2015 but there are legal fees still to be paid in 2016.  I was wondering ahead how I get these fees into my basis and lower the gain.

 

 

 

 

 

[TKTax]

I used a worksheet from publication 537. It is designed to adjust for a reduced selling price, but it works for adjusting the basis also. It changes your gross profit ratio for current and future installments. 

[ILLMAS]

I would think the final cost will be on Sch A as either legal fees or if you know the 2016 legal fees, reduce 2015 selling price by the legal fees, and in 2016 use that amount against the actual legal fees to break even.