discount on installment sale

[grandmabee]

I haven't done one of these in years.  If a client takes a discount and settles for less for a payoff on an installment sale, how do I report that?

[Lee B]

You have to recalculate the capital gain percentage

[grandmabee]

Yes, I knew that, but I guess not sure how to show on return.  Do I change everything on the 6252 or just the gross profit % number.  now we have to complete part one each year, not just year of sale.

 

[Lee B]

Copied from Pub 537:

"Example.

In 2016, you sold land with a basis of $40,000 for $100,000. Your gross profit was $60,000. You received a $20,000 down payment and the buyer's note for $80,000. The note provides for four annual payments of $20,000 each, plus 8% interest, beginning in 2017. Your gross profit percentage is 60%. You reported a gain of $12,000 on each payment received in 2016 and 2017.

In 2018, you and the buyer agreed to reduce the purchase price to $85,000 and payments during 2018, 2019, and 2020 are reduced to $15,000 for each year.

The new gross profit percentage, 46.67%, is figured on Example—Worksheet B.

You will report a gain of $7,000 (46.67% of $15,000) on each of the $15,000 installments due in 2018, 2019, and 2020."

[grandmabee]

Thank you,  it made me chuckle, I guess I could also look up the instruction before I asked on here.

[Catherine]

18 hours ago, grandmabee said:

Thank you,  it made me chuckle, I guess I could also look up the instruction before I asked on here.

where's the fun in that?