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Find State Tax Return

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Find State Tax Return

Find state tax return Publication 523 - Introductory Material Table of Contents Future Developments Reminders IntroductionOrdering forms and publications. Find state tax return Tax questions. Find state tax return Useful Items - You may want to see: Future Developments For the latest information about developments related to Publication 523, such as legislation enacted after it was published, go to www. Find state tax return irs. Find state tax return gov/pub523. Find state tax return Reminders Change of address. Find state tax return  If you change your mailing address, be sure to notify the Internal Revenue Service (IRS) using Form 8822, Change of Address. Find state tax return Mail it to the Internal Revenue Service Center for your old address. Find state tax return (Addresses for the Service Centers are on the back of the form. Find state tax return ) Home sold with undeducted points. Find state tax return  If you have not deducted all the points you paid to secure a mortgage on your old home, you may be able to deduct the remaining points in the year of sale. Find state tax return See Points in Publication 936, Home Mortgage Interest Deduction. Find state tax return Photographs of missing children. Find state tax return  The Internal Revenue Service is a proud partner with the National Center for Missing and Exploited Children. Find state tax return Photographs of missing children selected by the Center may appear in this publication on pages that would otherwise be blank. Find state tax return You can help bring these children home by looking at the photographs and calling 1-800-THE-LOST (1-800-843-5678) if you recognize a child. Find state tax return Introduction This publication explains the tax rules that apply when you sell your main home. Find state tax return In most cases, your main home is the one in which you live most of the time. Find state tax return If you sold your main home in 2013, you may be able to exclude from income any gain up to a limit of $250,000 ($500,000 on a joint return in most cases). Find state tax return See Excluding the Gain , later. Find state tax return Generally, if you can exclude all the gain, you do not need to report the sale on your tax return. Find state tax return If you have gain that cannot be excluded, you generally must report it on Form 8949, Sales and Other Dispositions of Capital Assets, and Schedule D (Form 1040), Capital Gains and Losses. Find state tax return You may also have to complete Form 4797, Sales of Business Property. Find state tax return See Reporting the Sale , later. Find state tax return If you have a loss on the sale, you generally cannot deduct it on your return. Find state tax return However, you may need to report it. Find state tax return See Reporting the Sale , later. Find state tax return The main topics in this publication are: Figuring gain or loss, Basis, Excluding the gain, Ownership and use tests, and Reporting the sale. Find state tax return Other topics include: Business use or rental of home, Deducting taxes in the year of sale, and Recapturing a federal mortgage subsidy. Find state tax return Net Investment Income Tax (NIIT). Find state tax return   If any part of the gain on the sale of a home is not excluded under the rules discussed in this publication, it may be subject to the NIIT. Find state tax return For more details, see Form 8960, Net Investment Income Tax—Individuals, Estates, and Trusts, and its instructions. Find state tax return Worksheets. Find state tax return   Near the end of this publication you will find worksheets you can use to figure your gain (or loss) and your exclusion. Find state tax return Use Worksheet 1 to figure the adjusted basis of the home you sold. Find state tax return Use Worksheet 2 to figure the gain (or loss), the exclusion, and the taxable gain (if any) on the sale. Find state tax return If you do not qualify for the maximum exclusion, use Worksheet 3 to figure your reduced maximum exclusion. Find state tax return Date of sale. Find state tax return    If you received a Form 1099-S, Proceeds From Real Estate Transactions, the date of sale should be shown in box 1. Find state tax return If you did not receive this form, the date of sale is the earlier of (a) the date title transferred or (b) the date the economic burdens and benefits of ownership shifted to the buyer. Find state tax return In most cases, these dates are the same. Find state tax return What is not covered in this publication. Find state tax return   This publication does not cover the sale of rental property, second homes, or vacation homes. Find state tax return For information on how to report any gain or loss from those sales, see Publication 544, Sales and Other Dispositions of Assets. Find state tax return Comments and suggestions. Find state tax return   We welcome your comments about this publication and your suggestions for future editions. Find state tax return   You can write to us at the following address: Internal Revenue Service Tax Forms and Publications Division 1111 Constitution Ave. Find state tax return NW, IR-6526 Washington, DC 20224   We respond to many letters by telephone. Find state tax return Therefore, it would be helpful if you would include your daytime phone number, including the area code, in your correspondence. Find state tax return   You can send your comments from www. Find state tax return irs. Find state tax return gov/formspubs/. Find state tax return Click on “More Information” and then on “Comment on Tax Forms and Publications”. Find state tax return   Although we cannot respond individually to each comment received, we do appreciate your feedback and will consider your comments as we revise our tax products. Find state tax return Ordering forms and publications. Find state tax return   Visit www. Find state tax return irs. Find state tax return gov/formspubs/ to download forms and publications, call 1-800-TAX-FORM (1-800-829-3676), or write to the address below and receive a response within 10 days after your request is received. Find state tax return Internal Revenue Service 1201 N. Find state tax return Mitsubishi Motorway Bloomington, IL 61705-6613 Tax questions. Find state tax return   If you have a tax question, check the information available on IRS. Find state tax return gov or call 1-800-829-1040. Find state tax return We cannot answer tax questions sent to either of the above addresses. Find state tax return Useful Items - You may want to see: Publication 527 Residential Rental Property 530 Tax Information for Homeowners 544 Sales and Other Dispositions of Assets 547 Casualties, Disasters, and Thefts 551 Basis of Assets 587 Business Use of Your Home 936 Home Mortgage Interest Deduction 4681 Canceled Debts, Foreclosures, Repossessions, and Abandonments Form (and Instructions) Schedule A (Form 1040) Itemized Deductions Schedule D (Form 1040) Capital Gains and Losses 982 Reduction of Tax Attributes Due to Discharge of Indebtedness 1040 U. Find state tax return S. Find state tax return Individual Income Tax Return 1040NR U. Find state tax return S. Find state tax return Nonresident Alien Income Tax Return 1040X Amended U. Find state tax return S. Find state tax return Individual Income Tax Return 1099-S Proceeds From Real Estate Transactions 4797 Sales of Business Property 5405 Repayment of the First-Time Homebuyer Credit 8822 Change of Address 8828 Recapture of Federal Mortgage Subsidy 8939 Allocation of Increase in Basis for Property Acquired From a Decedent 8949 Sales and Other Dispositions of Capital Assets W-2 Wage and Tax Statement See How To Get Tax Help , near the end of this publication, for information about getting these publications and forms. Find state tax return Prev  Up  Next   Home   More Online Publications
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Face-to-face Tax Help

IRS Taxpayer Assistance Centers (TACs) are your source for personal tax help when you believe your tax issue can only be handled face-to-face. No appointment is necessary.

Keep in mind, many questions can be resolved online without waiting in line. Through IRS.gov you can:
• Set up a payment plan.
• Get a transcript of your tax return.
• Make a payment.
• Check on your refund.
• Find answers to many of your tax questions.

We are now referring all requests for tax return preparation services to other available resources. You can take advantage of free tax preparation through Free File, Free File Fillable Forms or through a volunteer site in your community. To find the nearest volunteer site location or to get more information about Free File, go to the top of the page and enter “Free Tax Help” in the Search box.

If you have a tax account issues and feel that it requires talking with someone face-to-face, visit your local TAC.

Caution:  Many of our offices are located in Federal Office Buildings. These buildings may not allow visitors to bring in cell phones with camera capabilities.

Multilingual assistance is available in every office. Hours of operation are subject to change.

Before visiting your local office click on "Services Provided" in the chart below to see what services are available. Services are limited and not all services are available at every TAC office and may vary from site to site. You can get these services on a walk-in basis.

City  Street Address  Days/Hours of Service  Telephone* 
Bend 

250 NW Franklin Ave.
Bend, OR  97701

Monday-Friday 8:30 a.m.- 4:30 p.m.
(Closed for lunch 12:30 p.m. - 1:30 p.m.)

 

Services Provided

(541) 706-5732
Eugene 211 E 7th           
Eugene, OR 97401

Monday-Friday 8:30 a.m.- 4:30 p.m.

 

Services Provided

(541) 342-8766
Medford 960 Ellendale Dr.
Medford, OR 97504

Monday-Friday 8:30 a.m.- 4:30 p.m.
(Closed for lunch 12:00 noon - 1:30 p.m.)

 

Services Provided

(541) 282-1350
Portland 1220 SW Third Ave.
Portland, OR  97204
 

Monday-Friday 8:30 a.m.- 4:30 p.m.

 

Services Provided

(503) 265-3501
Salem

1660 Oak St. S.E.
Salem, OR  97301

Monday-Friday 8:30 a.m.- 4:30 p.m.

 

Services Provided

(503) 587-3101

* Note: The phone numbers in the chart above are not toll-free for all locations. When you call, you will reach a recorded business message with information about office hours, locations and services provided in that office. If face-to-face assistance is not a priority for you, you may also get help with IRS letters or resolve tax account issues by phone, toll free at 1-800-829-1040 (individuals) or 1-800-829-4933 (businesses). 

For information on where to file your tax return please see Where to File Addresses

The Taxpayer Advocate Service: Call (503) 265-3591 in the Portland area or 1-877-777-4778 elsewhere, or see  Publication 1546, The Taxpayer Advocate Service of the IRS. For further information, see  Tax Topic 104.

Partnerships

IRS and organizations all over the country are partnering to assist taxpayers. Through these partnerships, organizations are also achieving their own goals. These mutually beneficial partnerships are strengthening outreach efforts and bringing education and assistance to millions.

For more information about these programs for individuals and families, contact the Stakeholder Partnerships, Education and Communication Office at:

Internal Revenue Service
100 SW Main Street, MS 0180
Portland, OR 97204

For more information about these programs for businesses, your local Stakeholder Liaison office establishes relationships with organizations representing small business and self-employed taxpayers. They provide information about the policies, practices and procedures the IRS uses to ensure compliance with the tax laws. To establish a relationship with us, use this list to find a contact in your state:

Stakeholder Liaison (SL) Phone Numbers for Organizations Representing Small Businesses and Self-employed Taxpayers.

Page Last Reviewed or Updated: 28-Mar-2014

The Find State Tax Return

Find state tax return 10. Find state tax return   Installment Sales Table of Contents Introduction Topics - This chapter discusses: Useful Items - You may want to see: Installment Sale of a Farm Installment MethodWhen to elect out. Find state tax return Revoking the election. Find state tax return More information. Find state tax return Figuring Installment Sale Income Payments Received or Considered Received ExampleSection 1231 gains. Find state tax return Summary. Find state tax return Introduction An installment sale is a sale of property where you receive at least one payment after the tax year of the sale. Find state tax return If you realize a gain on an installment sale, you may be able to report part of your gain when you receive each payment. Find state tax return This method of reporting gain is called the installment method. Find state tax return You cannot use the installment method to report a loss. Find state tax return You can choose to report all of your gain in the year of sale. Find state tax return Installment obligation. Find state tax return   The buyer's obligation to make future payments to you can be in the form of a deed of trust, note, land contract, mortgage, or other evidence of the buyer's debt to you. Find state tax return Topics - This chapter discusses: The general rules that apply to using the installment method Installment sale of a farm Useful Items - You may want to see: Publication 523 Selling Your Home 535 Business Expenses 537 Installment Sales 538 Accounting Periods and Methods 544 Sales and Other Dispositions of Assets Form (and Instructions) 4797 Sales of Business Property 6252 Installment Sale Income See chapter 16 for information about getting publications and forms. Find state tax return Installment Sale of a Farm The installment sale of a farm for one overall price under a single contract is not the sale of a single asset. Find state tax return It generally includes the sale of real property and personal property reportable on the installment method. Find state tax return It may also include the sale of property for which you must maintain an inventory, which cannot be reported on the installment method. Find state tax return See Inventory , later. Find state tax return The selling price must be allocated to determine the amount received for each class of asset. Find state tax return The tax treatment of the gain or loss on the sale of each class of assets is determined by its classification as a capital asset, as property used in the business, or as property held for sale and by the length of time the asset was held. Find state tax return (See chapter 8 for a discussion of capital assets and chapter 9 for a discussion of property used in the business. Find state tax return ) Separate computations must be made to figure the gain or loss for each class of asset sold. Find state tax return See Sale of a Farm in chapter 8. Find state tax return If you report the sale of property on the installment method, any depreciation recapture under section 1245 or 1250 of the Internal Revenue Code is generally taxable as ordinary income in the year of sale. Find state tax return See Depreciation recapture , later. Find state tax return This applies even if no payments are received in that year. Find state tax return Installment Method An installment sale is a sale of property where you receive at least one payment after the tax year of the sale. Find state tax return A farmer who is not required to maintain an inventory can use the installment method to report gain from the sale of property used or produced in farming. Find state tax return See Inventory , later, for information on the sale of farm property where inventory items are included in the assets sold. Find state tax return If a sale qualifies as an installment sale, the gain must be reported under the installment method unless you elect out of using the installment method. Find state tax return Electing out of the installment method. Find state tax return   If you elect not to use the installment method, you generally report the entire gain in the year of sale, even though you do not receive all the sale proceeds in that year. Find state tax return   To make this election, do not report your sale on Form 6252. Find state tax return Instead, report it on Schedule D (Form 1040), Form 4797, or both. Find state tax return When to elect out. Find state tax return   Make this election by the due date, including extensions, for filing your tax return for the year the sale takes place. Find state tax return   However, if you timely file your tax return for the year the sale takes place without making the election, you still can make the election by filing an amended return within 6 months of the due date of the return (excluding extensions). Find state tax return Write “Filed pursuant to section 301. Find state tax return 9100-2” at the top of the amended return and file it where the original return was filed. Find state tax return Revoking the election. Find state tax return   Once made, the election can be revoked only with IRS approval. Find state tax return A revocation is retroactive. Find state tax return More information. Find state tax return   See Electing Out of the Installment Method in Publication 537 for more information. Find state tax return Inventory. Find state tax return   The sale of farm inventory items cannot be reported on the installment method. Find state tax return All gain or loss on their sale must be reported in the year of sale, even if you receive payment in later years. Find state tax return   If inventory items are included in an installment sale, you may have an agreement stating which payments are for inventory and which are for the other assets being sold. Find state tax return If you do not, each payment must be allocated between the inventory and the other assets sold. Find state tax return Sale at a loss. Find state tax return   If your sale results in a loss, you cannot use the installment method. Find state tax return If the loss is on an installment sale of business assets, you can deduct it only in the tax year of sale. Find state tax return Figuring Installment Sale Income Each payment on an installment sale usually consists of the following three parts. Find state tax return Interest income. Find state tax return Return of your adjusted basis in the property. Find state tax return Gain on the sale. Find state tax return In each year you receive a payment, you must include in income both the interest part and the part that is your gain on the sale. Find state tax return You do not include in income the part that is the return of your basis in the property. Find state tax return Basis is the amount of your investment in the property for installment sale purposes. Find state tax return Interest income. Find state tax return   You must report interest as ordinary income. Find state tax return Interest is generally not included in a down payment. Find state tax return However, you may have to treat part of each later payment as interest, even if it is not called interest in your agreement with the buyer. Find state tax return Interest provided in the agreement is called stated interest. Find state tax return If the agreement does not provide for enough stated interest, there may be unstated interest or original issue discount. Find state tax return See Unstated interest , later. Find state tax return    You must continue to report the interest income on payments you receive in subsequent years as interest income. Find state tax return Adjusted basis and installment sale income (gain on sale). Find state tax return   After you have determined how much of each payment to treat as interest, you treat the rest of each payment as if it were made up of two parts. Find state tax return A tax-free return of your adjusted basis in the property, and Your gain (referred to as “installment sale income” on Form 6252). Find state tax return Figuring adjusted basis for installment sale purposes. Find state tax return   You can use Worksheet 10-1 to figure your adjusted basis in the property for installment sale purposes. Find state tax return When you have completed the worksheet, you will also have determined the gross profit percentage necessary to figure your installment sale income (gain) for this year. Find state tax return    Worksheet 10-1. Find state tax return Figuring Adjusted Basis and Gross Profit Percentage 1. Find state tax return Enter the selling price for the property   2. Find state tax return Enter your adjusted basis for the property     3. Find state tax return Enter your selling expenses     4. Find state tax return Enter any depreciation recapture     5. Find state tax return Add lines 2, 3, and 4. Find state tax return  This is your adjusted basis  for installment sale purposes   6. Find state tax return Subtract line 5 from line 1. Find state tax return If zero or less, enter -0-. Find state tax return  This is your gross profit     If the amount entered on line 6 is zero, Stop here. Find state tax return You cannot use the installment method. Find state tax return   7. Find state tax return Enter the contract price for the property   8. Find state tax return Divide line 6 by line 7. Find state tax return This is your gross profit percentage   Selling price. Find state tax return   The selling price is the total cost of the property to the buyer and includes the following. Find state tax return Any money you are to receive. Find state tax return The fair market value (FMV) of any property you are to receive (FMV is discussed at Property used as a payment under Payments Received or Considered Received ). Find state tax return Any existing mortgage or other debt the buyer pays, assumes, or takes (a note, mortgage, or any other liability, such as a lien, accrued interest, or taxes you owe on the property). Find state tax return Any of your selling expenses the buyer pays. Find state tax return Do not include stated interest, unstated interest, any amount recomputed or recharacterized as interest, or original issue discount. Find state tax return Adjusted basis for installment sale purposes. Find state tax return   Your adjusted basis is the total of the following three items. Find state tax return Adjusted basis. Find state tax return Selling expenses. Find state tax return Depreciation recapture. Find state tax return Adjusted basis. Find state tax return   Basis is your investment in the property for installment sale purposes. Find state tax return The way you figure basis depends on how you acquire the property. Find state tax return The basis of property you buy is generally its cost. Find state tax return The basis of property you inherit, receive as a gift, build yourself, or receive in a tax-free exchange is figured differently. Find state tax return   While you own property, various events may change your original basis. Find state tax return Some events, such as adding rooms or making permanent improvements, increase basis. Find state tax return Others, such as deductible casualty losses or depreciation previously allowed or allowable, decrease basis. Find state tax return The result is adjusted basis. Find state tax return See chapter 6 and Publication 551, Basis of Assets, for more information. Find state tax return Selling expenses. Find state tax return   Selling expenses relate to the sale of the property. Find state tax return They include commissions, attorney fees, and any other expenses paid on the sale. Find state tax return Selling expenses are added to the basis of the sold property. Find state tax return Depreciation recapture. Find state tax return   If the property you sold was depreciable property, you may need to recapture part of the gain on the sale as ordinary income. Find state tax return See Depreciation Recapture in chapter 9 and Depreciation Recapture Income in Publication 537. Find state tax return Gross profit. Find state tax return   Gross profit is the total gain you report on the installment method. Find state tax return   To figure your gross profit, subtract your adjusted basis for installment sale purposes from the selling price. Find state tax return If the property you sold was your home, subtract from the gross profit any gain you can exclude. Find state tax return Contract price. Find state tax return   Contract price equals: The selling price, minus The mortgages, debts, and other liabilities assumed or taken by the buyer, plus The amount by which the mortgages, debts, and other liabilities assumed or taken by the buyer exceed your adjusted basis for installment sale purposes. Find state tax return Gross profit percentage. Find state tax return   A certain percentage of each payment (after subtracting interest) is reported as installment sale income. Find state tax return This percentage is called the gross profit percentage and is figured by dividing your gross profit from the sale by the contract price. Find state tax return   The gross profit percentage generally remains the same for each payment you receive. Find state tax return However, see the example under Selling price reduced , later, for a situation where the gross profit percentage changes. Find state tax return Amount to report as installment sale income. Find state tax return   Multiply the payments you receive each year (less interest) by the gross profit percentage. Find state tax return The result is your installment sales income for the tax year. Find state tax return In certain circumstances, you may be treated as having received a payment, even though you received nothing directly. Find state tax return A receipt of property or the assumption of a mortgage on the property sold may be treated as a payment. Find state tax return For a detailed discussion, see Payments Received or Considered Received , later. Find state tax return Selling price reduced. Find state tax return   If the selling price is reduced at a later date, the gross profit on the sale also will change. Find state tax return You then must refigure the gross profit percentage for the remaining payments. Find state tax return Refigure your gross profit using Worksheet 10-2. Find state tax return New Gross Profit Percentage — Selling Price Reduced. Find state tax return You will spread any remaining gain over future installments. Find state tax return    Worksheet 10-2. Find state tax return New Gross Profit Percentage — Selling Price Reduced 1. Find state tax return Enter the reduced selling  price for the property   2. Find state tax return Enter your adjusted  basis for the  property     3. Find state tax return Enter your selling  expenses     4. Find state tax return Enter any depreciation  recapture     5. Find state tax return Add lines 2, 3, and 4. Find state tax return   6. Find state tax return Subtract line 5 from line 1. Find state tax return  This is your adjusted  gross profit   7. Find state tax return Enter any installment sale  income reported in  prior year(s)   8. Find state tax return Subtract line 7 from line 6   9. Find state tax return Future installments     10. Find state tax return Divide line 8 by line 9. Find state tax return  This is your new  gross profit percentage*. Find state tax return   * Apply this percentage to all future payments to determine how much of each of those payments is installment sale income. Find state tax return Example. Find state tax return In 2011, you sold land with a basis of $40,000 for $100,000. Find state tax return Your gross profit was $60,000. Find state tax return You received a $20,000 down payment and the buyer's note for $80,000. Find state tax return The note provides for monthly payments of $1,953 each, figured at 8% interest, amortized over four years, beginning in January 2012. Find state tax return Your gross profit percentage was 60%. Find state tax return You received the down payment of $20,000 in 2011 and total payments of $23,436 in 2012, of which $17,675 was principal and $5,761 was interest according to the amortization schedule. Find state tax return You reported a gain of $12,000 on the down payment received in 2011 and $10,605 ($17,675 X 60% (. Find state tax return 60)) in 2012. Find state tax return In January 2013, you and the buyer agreed to reduce the purchase price to $85,000 and payments during 2013, 2014, and 2015 are reduced to $1,483 a month amortized over the remaining three years. Find state tax return The new gross profit percentage, 47. Find state tax return 32%, is figured in Example — Worksheet 10-2. Find state tax return Example — Worksheet 10-2. Find state tax return New Gross Profit Percentage — Selling Price Reduced 1. Find state tax return Enter the reduced selling  price for the property 85,000 2. Find state tax return Enter your adjusted  basis for the  property 40,000   3. Find state tax return Enter your selling  expenses -0-   4. Find state tax return Enter any depreciation  recapture -0-   5. Find state tax return Add lines 2, 3, and 4. Find state tax return 40,000 6. Find state tax return Subtract line 5 from line 1. Find state tax return  This is your adjusted  gross profit 45,000 7. Find state tax return Enter any installment sale  income reported in  prior year(s) 22,605 8. Find state tax return Subtract line 7 from line 6 22,395 9. Find state tax return Future installments   47,325 10. Find state tax return Divide line 8 by line 9. Find state tax return  This is your new  gross profit percentage*. Find state tax return 47. Find state tax return 32% * Apply this percentage to all future payments to determine how much of each of those payments is installment sale income. Find state tax return You will report installment sale income of $6,878 (47. Find state tax return 32% of $14,535) in 2013, $7,449 (47. Find state tax return 32% of $15,742) in 2014, and $8,067 (47. Find state tax return 32% of $17,048) in 2015. Find state tax return Form 6252. Find state tax return   Use Form 6252 to report an installment sale in the year it takes place and to report payments received, or considered received because of related party resales, in later years. Find state tax return Attach it to your tax return for each year. Find state tax return Disposition of Installment Obligation If you are using the installment method and you dispose of the installment obligation, generally you will have a gain or loss to report. Find state tax return It is considered gain or loss on the sale of the property for which you received the installment obligation. Find state tax return Cancellation. Find state tax return   If an installment obligation is canceled or otherwise becomes unenforceable, it is treated as a disposition other than a sale or exchange. Find state tax return Your gain or loss is the difference between your basis in the obligation and its fair market value (FMV) at the time you cancel it. Find state tax return If the parties are related, the FMV of the obligation is considered to be no less than its full face value. Find state tax return Transfer due to death. Find state tax return   The transfer of an installment obligation (other than to a buyer) as a result of the death of the seller is not a disposition. Find state tax return Any unreported gain from the installment obligation is not treated as gross income to the decedent. Find state tax return No income is reported on the decedent's return due to the transfer. Find state tax return Whoever receives the installment obligation as a result of the seller's death is taxed on the installment payments the same as the seller would have been had the seller lived to receive the payments. Find state tax return   However, if the installment obligation is canceled, becomes unenforceable, or is transferred to the buyer because of the death of the holder of the obligation, it is a disposition. Find state tax return The estate must figure its gain or loss on the disposition. Find state tax return If the holder and the buyer were related, the FMV of the installment obligation is considered to be no less than its full face value. Find state tax return More information. Find state tax return   For more information on the disposition of an installment obligation, see Publication 537. Find state tax return Sale of depreciable property. Find state tax return   You generally cannot report gain from the sale of depreciable property to a related person on the installment method. Find state tax return See Sale to a Related Person in Publication 537. Find state tax return   You cannot use the installment method to report any depreciation recapture income up to the gain on the sale. Find state tax return However, report any gain greater than the recapture income on the installment method. Find state tax return   The recapture income reported in the year of sale is included in your installment sale basis to determine your gross profit on the installment sale. Find state tax return   Figure your depreciation recapture income (including the section 179 deduction and the section 179A deduction recapture) in Part III of Form 4797. Find state tax return Report the depreciation recapture income in Part II of Form 4797 as ordinary income in the year of sale. Find state tax return    If you sell depreciable business property, prepare Form 4797 first in order to figure the amount to enter on line 12 of Part I, Form 6252. Find state tax return See the Form 6252 instructions for details. Find state tax return   For more information on the section 179 deduction, see Section 179 Expense Deduction in chapter 7. Find state tax return For more information on depreciation recapture, see Depreciation Recapture in  chapter 9. Find state tax return Payments Received or Considered Received You must figure your gain each year on the payments you receive, or are treated as receiving, from an installment sale. Find state tax return In certain situations, you are considered to have received a payment, even though the buyer does not pay you directly. Find state tax return These situations occur when the buyer assumes or pays any of your debts, such as a loan, or pays any of your expenses, such as a sales commission. Find state tax return However, as discussed later, the buyer's assumption of your debt is treated as a recovery of basis, rather than as a payment, in many cases. Find state tax return Buyer pays seller's expenses. Find state tax return   If the buyer pays any of your expenses related to the sale of your property, it is considered a payment to you in the year of sale. Find state tax return Include these expenses in the selling and contract prices when figuring the gross profit percentage. Find state tax return Buyer assumes mortgage. Find state tax return   If the buyer assumes or pays off your mortgage, or otherwise takes the property subject to the mortgage, the following rules apply. Find state tax return Mortgage less than basis. Find state tax return   If the buyer assumes a mortgage that is not more than your installment sale basis in the property, it is not considered a payment to you. Find state tax return It is considered a recovery of your basis. Find state tax return The contract price is the selling price minus the mortgage. Find state tax return Example. Find state tax return You sell property with an adjusted basis of $19,000. Find state tax return You have selling expenses of $1,000. Find state tax return The buyer assumes your existing mortgage of $15,000 and agrees to pay you $10,000 (a cash down payment of $2,000 and $2,000 (plus 8% interest) in each of the next 4 years). Find state tax return The selling price is $25,000 ($15,000 + $10,000). Find state tax return Your gross profit is $5,000 ($25,000 − $20,000 installment sale basis). Find state tax return The contract price is $10,000 ($25,000 − $15,000 mortgage). Find state tax return Your gross profit percentage is 50% ($5,000 ÷ $10,000). Find state tax return You report half of each $2,000 payment received as gain from the sale. Find state tax return You also report all interest you receive as ordinary income. Find state tax return Mortgage more than basis. Find state tax return   If the buyer assumes a mortgage that is more than your installment sale basis in the property, you recover your entire basis. Find state tax return The part of the mortgage greater than your basis is treated as a payment received in the year of sale. Find state tax return   To figure the contract price, subtract the mortgage from the selling price. Find state tax return This is the total amount (other than interest) you will receive directly from the buyer. Find state tax return Add to this amount the payment you are considered to have received (the difference between the mortgage and your installment sale basis). Find state tax return The contract price is then the same as your gross profit from the sale. Find state tax return    If the mortgage the buyer assumes is equal to or more than your installment sale basis, the gross profit percentage always will be 100%. Find state tax return Example. Find state tax return The selling price for your property is $9,000. Find state tax return The buyer will pay you $1,000 annually (plus 8% interest) over the next 3 years and assume an existing mortgage of $6,000. Find state tax return Your adjusted basis in the property is $4,400. Find state tax return You have selling expenses of $600, for a total installment sale basis of $5,000. Find state tax return The part of the mortgage that is more than your installment sale basis is $1,000 ($6,000 − $5,000). Find state tax return This amount is included in the contract price and treated as a payment received in the year of sale. Find state tax return The contract price is $4,000: Selling price $9,000 Minus: Mortgage (6,000) Amount actually received $3,000 Add difference:   Mortgage $6,000   Minus: Installment sale basis 5,000 1,000 Contract price $4,000   Your gross profit on the sale is also $4,000: Selling price $9,000 Minus: Installment sale basis (5,000) Gross profit $4,000   Your gross profit percentage is 100%. Find state tax return Report 100% of each payment (less interest) as gain from the sale. Find state tax return Treat the $1,000 difference between the mortgage and your installment sale basis as a payment and report 100% of it as gain in the year of sale. Find state tax return Buyer assumes other debts. Find state tax return   If the buyer assumes any other debts, such as a loan or back taxes, it may be considered a payment to you in the year of sale. Find state tax return   If the buyer assumes the debt instead of paying it off, only part of it may have to be treated as a payment. Find state tax return Compare the debt to your installment sale basis in the property being sold. Find state tax return If the debt is less than your installment sale basis, none of it is treated as a payment. Find state tax return If it is more, only the difference is treated as a payment. Find state tax return If the buyer assumes more than one debt, any part of the total that is more than your installment sale basis is considered a payment. Find state tax return These rules are the same as the rules discussed earlier under Buyer assumes mortgage . Find state tax return However, they apply only to the following types of debt the buyer assumes. Find state tax return Those acquired from ownership of the property you are selling, such as a mortgage, lien, overdue interest, or back taxes. Find state tax return Those acquired in the ordinary course of your business, such as a balance due for inventory you purchased. Find state tax return   If the buyer assumes any other type of debt, such as a personal loan or your legal fees relating to the sale, it is treated as if the buyer had paid off the debt at the time of the sale. Find state tax return The value of the assumed debt is then considered a payment to you in the year of sale. Find state tax return Property used as a payment. Find state tax return   If you receive property rather than money from the buyer, it is still considered a payment in the year received. Find state tax return However, see Trading property for like-kind property , later. Find state tax return Generally, the amount of the payment is the property's FMV on the date you receive it. Find state tax return Exception. Find state tax return   If the property the buyer gives you is payable on demand or readily tradable (see examples later), the amount you should consider as payment in the year received is: The FMV of the property on the date you receive it if you use the cash method of accounting, The face amount of the obligation on the date you receive it if you use an accrual method of accounting, or The stated redemption price at maturity less any original issue discount (OID) or, if there is no OID, the stated redemption price at maturity appropriately discounted to reflect total unstated interest. Find state tax return See Unstated interest , later. Find state tax return Examples. Find state tax return If you receive a note from the buyer as payment, and the note stipulates that you can demand payment from the buyer at any time, the note is payable on demand. Find state tax return If you receive marketable securities from the buyer as payment, and you can sell the securities on an established securities market (such as the New York Stock Exchange) at any time, the securities are readily tradable. Find state tax return In these examples, use the above rules to determine the amount you should consider as payment in the year received. Find state tax return Debt not payable on demand. Find state tax return   Any evidence of debt you receive from the buyer that is not payable on demand is not considered a payment. Find state tax return This is true even if the debt is guaranteed by a third party, including a government agency. Find state tax return Fair market value (FMV). Find state tax return   This is the price at which property would change hands between a willing buyer and a willing seller, neither being under any compulsion to buy or sell and both having a reasonable knowledge of all the necessary facts. Find state tax return Third-party note. Find state tax return   If the property the buyer gives you is a third-party note (or other obligation of a third party), you are considered to have received a payment equal to the note's FMV. Find state tax return Because the FMV of the note is itself a payment on your installment sale, any payments you later receive from the third party are not considered payments on the sale. Find state tax return The excess of the note's face value over its FMV is interest. Find state tax return Exclude this interest in determining the selling price of the property. Find state tax return However, see Exception under Property used as a payment , earlier. Find state tax return Example. Find state tax return You sold real estate in an installment sale. Find state tax return As part of the down payment, the buyer assigned to you a $50,000, 8% third-party note. Find state tax return The FMV of the third-party note at the time of the sale was $30,000. Find state tax return This amount, not $50,000, is a payment to you in the year of sale. Find state tax return The third-party note had an FMV equal to 60% of its face value ($30,000 ÷ $50,000), so 60% of each principal payment you receive on this note is a nontaxable return of capital. Find state tax return The remaining 40% is interest taxed as ordinary income. Find state tax return Bond. Find state tax return   A bond or other evidence of debt you receive from the buyer that is payable on demand or readily tradable in an established securities market is treated as a payment in the year you receive it. Find state tax return For more information on the amount you should treat as a payment, see Exception under Property used as a payment , earlier. Find state tax return   If you receive a government or corporate bond for a sale before October 22, 2004, and the bond has interest coupons attached or can be readily traded in an established securities market, you are considered to have received payment equal to the bond's FMV. Find state tax return However, see Exception under Property used as a payment , earlier. Find state tax return Buyer's note. Find state tax return   The buyer's note (unless payable on demand) is not considered payment on the sale. Find state tax return However, its full face value is included when figuring the selling price and the contract price. Find state tax return Payments you receive on the note are used to figure your gain in the year received. Find state tax return Sale to a related person. Find state tax return   If you sell depreciable property to a related person and the sale is an installment sale, you may not be able to report the sale using the installment method. Find state tax return For information on these rules, see the Instructions for Form 6252 and Sale to a Related Person in Publication 537. Find state tax return Trading property for like-kind property. Find state tax return   If you trade business or investment property solely for the same kind of property to be held as business or investment property, you can postpone reporting the gain. Find state tax return See Like-Kind Exchanges in chapter 8 for a discussion of like-kind property. Find state tax return   If, in addition to like-kind property, you receive an installment obligation in the exchange, the following rules apply to determine installment sale income each year. Find state tax return The contract price is reduced by the FMV of the like-kind property received in the trade. Find state tax return The gross profit is reduced by any gain on the trade that can be postponed. Find state tax return Like-kind property received in the trade is not considered payment on the installment obligation. Find state tax return Unstated interest. Find state tax return   An installment sale contract may provide that each deferred payment on the sale will include interest or that there will be an interest payment in addition to the principal payment. Find state tax return Interest provided in the contract is called stated interest. Find state tax return   If an installment sale contract does not provide for adequate stated interest, part of the stated principal amount of the contract may be recharacterized as interest. Find state tax return If Internal Revenue Code section 483 applies to the contract, this interest is called unstated interest. Find state tax return   If Internal Revenue Code section 1274 applies to the contract, this interest is called original issue discount (OID). Find state tax return   Generally, if a buyer gives a debt in consideration for personal use property, the unstated interest rules do not apply. Find state tax return Therefore, the buyer cannot deduct the unstated interest. Find state tax return The seller must report the unstated interest as income. Find state tax return Personal-use property is any property in which substantially all of its use by the buyer is not in connection with a trade or business or an investment activity. Find state tax return   If the debt is subject to the Internal Revenue Code section 483 rules and is also subject to the below-market loan rules, such as a gift loan, compensation-related loan or corporation-shareholder loan, then both parties are subject to the below-market loan rules rather than the unstated interest rules. Find state tax return   Unstated interest reduces the stated selling price of the property and the buyer's basis in the property. Find state tax return It increases the seller's interest income and the buyer's interest expense. Find state tax return   In general, an installment sale contract provides for adequate stated interest if the stated interest rate (based on an appropriate compounding period) is at least equal to the applicable federal rate (AFR). Find state tax return    The AFRs are published monthly in the Internal Revenue Bulletin (IRB). Find state tax return You can get this information by contacting an IRS office. Find state tax return IRBs are also available at IRS. Find state tax return gov. Find state tax return More information. Find state tax return   For more information, see Unstated Interest and Original Issue Discount (OID) in Publication 537. Find state tax return Example. Find state tax return You sell property at a contract price of $6,000 and your gross profit is $1,500. Find state tax return Your gross profit percentage is 25% ($1,500 ÷ $6,000). Find state tax return After subtracting interest, you report 25% of each payment, including the down payment, as installment sale income from the sale for the tax year you receive the payment. Find state tax return The remainder (balance) of each payment is the tax-free return of your adjusted basis. Find state tax return Example On January 3, 2013, you sold your farm, including the home, farm land and buildings. Find state tax return You received $50,000 down and the buyer's note for $200,000. Find state tax return In addition, the buyer assumed an outstanding $50,000 mortgage on the farm land. Find state tax return The total selling price was $300,000. Find state tax return The note payments of $25,000 each, plus adequate interest, are due every July 1 and January 1, beginning in July 2013. Find state tax return Your selling expenses were $15,000. Find state tax return Adjusted basis and depreciation. Find state tax return   The adjusted basis and depreciation claimed on each asset sold are as follows:   Depreciation Adjusted Asset Claimed Basis Home* -0- $33,743 Farm land -0- 73,610 Buildings $31,500 35,130 * Owned and used as main home for at least 2 of the 5 years prior to the sale Gain on each asset. Find state tax return   The following schedule shows the assets included in the sale, each asset's selling price based on its respective value, the selling expense allocated to each asset, the adjusted basis of each asset, and the gain on each asset. Find state tax return The selling expense for each asset is 5% of the selling price ($15,000 selling expense ÷ $300,000 selling price). Find state tax return   Selling Selling Adjusted     Price Expense Basis Gain Home* $60,000 $3,000 $33,743 $23,257 Farm land  165,000  8,250  73,610  83,140 Buildings 75,000 3,750 35,130 36,120   $300,000 $15,000 $142,483 $142,517 * Owned and used as main home for at least 2 of the 5 years prior to the sale Depreciation recapture. Find state tax return   The buildings are section 1250 property. Find state tax return There is no depreciation recapture income for them because they were depreciated using the straight line method. Find state tax return See chapter 9 for more information on depreciation recapture. Find state tax return   Special rules may apply when you sell section 1250 assets depreciated under the straight line method. Find state tax return See the Unrecaptured Section 1250 Gain Worksheet in the Instructions for Schedule D (Form 1040). Find state tax return See chapter 3 of Publication 544, Sales and Other Dispositions of Assets, for more information on section 1250 assets. Find state tax return Installment sale basis and gross profit. Find state tax return   The following table shows each asset reported on the installment method, its selling price, installment sale basis, and gross profit. Find state tax return     Installment     Selling Sale Gross   Price Basis Profit Farm land $165,000 $73,610 $83,140 Buildings 75,000 35,130 36,120   $240,000 $108,740 $119,260 Section 1231 gains. Find state tax return   The gain on the farm land and buildings is reported as section 1231 gains. Find state tax return See Section 1231 Gains and Losses in chapter 9. Find state tax return Contract price and gross profit percentage. Find state tax return   The contract price is $250,000 for the part of the sale reported on the installment method. Find state tax return This is the selling price ($300,000) minus the mortgage assumed ($50,000). Find state tax return   Gross profit percentage for the sale is 47. Find state tax return 70% ($119,260 gross profit ÷ $250,000 contract price). Find state tax return The gross profit percentage for each asset is figured as follows:   Percent Farm land ($83,140 ÷ $250,000) 33. Find state tax return 256 Buildings ($36,120 ÷ $250,000) 14. Find state tax return 448 Total 47. Find state tax return 70 Figuring the gain to report on the installment method. Find state tax return   One hundred percent (100%) of each payment is reported on the installment method. Find state tax return The total amount received on the sale in 2013 is $75,000 ($50,000 down payment + $25,000 payment on July 1). Find state tax return The installment sale part of the total payments received in 2013 is also $75,000. Find state tax return Figure the gain to report for each asset by multiplying its gross profit percentage times $75,000. Find state tax return   Income Farm land—33. Find state tax return 256% × $75,000 $24,942 Buildings—14. Find state tax return 448% × $75,000 10,836 Total installment income for 2013 $35,778 Reporting the sale. Find state tax return   Report the installment sale on Form 6252. Find state tax return Then report the amounts from Form 6252 on Form 4797 and Schedule D (Form 1040). Find state tax return Attach a separate page to Form 6252 that shows the computations in the example. Find state tax return If you sell depreciable business property, prepare Form 4797 first in order to figure the amount to enter on line 12 of Part I, Form 6252. Find state tax return Section 1231 gains. Find state tax return   The gains on the farm land and buildings are section 1231 gains. Find state tax return They may be reported as either capital or ordinary gain depending on the net balance when combined with other section 1231 losses. Find state tax return A net 1231 gain is capital gain and a net 1231 loss is an ordinary loss. Find state tax return Installment income for years after 2013. Find state tax return   You figure installment income for the years after 2013 by applying the same gross profit percentages to the payments you receive each year. Find state tax return If you receive $50,000 during the year, the entire $50,000 is considered received on the installment sale (100% × $50,000). Find state tax return You realize income as follows:   Income Farm land—33. Find state tax return 256% × $50,000 $16,628 Buildings—14. Find state tax return 448% × $50,000 7,224 Total installment income $23,852   In this example, no gain ever is recognized from the sale of your home. Find state tax return You will combine your section 1231 gains from this sale with section 1231 gains and losses from other sales in each of the later years to determine whether to report them as ordinary or capital gains. Find state tax return The interest received with each payment will be included in full as ordinary income. Find state tax return Summary. Find state tax return   The installment income (rounded to the nearest dollar) from the sale of the farm is reported as follows: Selling price $190,000 Minus: Installment basis (108,740) Gross profit $81,260     Gain reported in 2012 (year of sale) $35,778 Gain reported in 2013:   $50,000 × 47. Find state tax return 70% 23,850 Gain reported in 2014:   $50,000 × 47. Find state tax return 70% 23,850 Gain reported in 2015:   $50,000 × 47. Find state tax return 70% 23,850 Gain reported in 2016:   $25,000 × 47. Find state tax return 70% 11,925 Total gain reported $119,253 Prev  Up  Next   Home   More Online Publications