File your Taxes for Free!
  • Get your maximum refund*
  • 100% accurate calculations guaranteed*

TurboTax Federal Free Edition - File Taxes Online

Don't let filing your taxes get you down! We'll help make it as easy as possible. With e-file and direct deposit, there's no faster way to get your refund!

Approved TurboTax Affiliate Site. TurboTax and TurboTax Online, among others, are registered trademarks and/or service marks of Intuit Inc. in the United States and other countries. Other parties' trademarks or service marks are the property of the respective owners.


© 2012 - 2018 All rights reserved.

This is an Approved TurboTax Affiliate site. TurboTax and TurboTax Online, among other are registered trademarks and/or service marks of Intuit, Inc. in the United States and other countries. Other parties' trademarks or service marks are the property of the respective owners.
When discussing "Free e-file", note that state e-file is an additional fee. E-file fees do not apply to New York state returns. Prices are subject to change without notice. E-file and get your refund faster
*If you pay an IRS or state penalty or interest because of a TurboTax calculations error, we'll pay you the penalty and interest.
*Maximum Refund Guarantee - or Your Money Back: If you get a larger refund or smaller tax due from another tax preparation method, we'll refund the applicable TurboTax federal and/or state purchase price paid. TurboTax Federal Free Edition customers are entitled to payment of $14.99 and a refund of your state purchase price paid. Claims must be submitted within sixty (60) days of your TurboTax filing date and no later than 6/15/14. E-file, Audit Defense, Professional Review, Refund Transfer and technical support fees are excluded. This guarantee cannot be combined with the TurboTax Satisfaction (Easy) Guarantee. *We're so confident your return will be done right, we guarantee it. Accurate calculations guaranteed. If you pay an IRS or state penalty or interest because of a TurboTax calculations error, we'll pay you the penalty and interest.
https://turbotax.intuit.com/corp/guarantees.jsp

Irs Amendments

H&r Block EfileTaxes StateFile 2011 Taxes TurbotaxFile My 2012 Taxes Free OnlineI Need 2011 Tax FormsEz Tax Form 2013Amend My Tax Return1040ez Forms And InstructionsFree 2012 Tax HelpFree Efile For State TaxesIrs 2012 Tax Forms 1040ezHow To Amend A Tax Return OnlineIrsgov ComFile 1040ez Online IrsIrs Form 1040xEfile IrsFiling Amended Tax Return 2009Irs Amendment FormDo Taxes Online 2010Income Tax Forms 2012How To Amend My 2012 Tax ReturnFiling TaxesStates With No Retirement Income TaxFree H&r Block Tax Software 2011H R Block Tax PreparationFree State TaxHow To File 2011 Income TaxAmended Tax Return FormsDoes Military Pay TaxesCan I File Previous Years Taxes Online1040ez Tax Instructions1040 ExCollege Student TaxesFile Taxes For 2010 Online Free2012 Irs FormsE-file State And Federal Taxes For Free2012 Tax ReturnAmendment Taxes1040ez For 2011Turbotax 2009

Irs Amendments

Irs amendments 10. Irs amendments   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. Irs amendments Revoking the election. Irs amendments More information. Irs amendments Figuring Installment Sale Income Payments Received or Considered Received ExampleSection 1231 gains. Irs amendments Summary. Irs amendments Introduction An installment sale is a sale of property where you receive at least one payment after the tax year of the sale. Irs amendments If you realize a gain on an installment sale, you may be able to report part of your gain when you receive each payment. Irs amendments This method of reporting gain is called the installment method. Irs amendments You cannot use the installment method to report a loss. Irs amendments You can choose to report all of your gain in the year of sale. Irs amendments Installment obligation. Irs amendments   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. Irs amendments 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. Irs amendments 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. Irs amendments It generally includes the sale of real property and personal property reportable on the installment method. Irs amendments It may also include the sale of property for which you must maintain an inventory, which cannot be reported on the installment method. Irs amendments See Inventory , later. Irs amendments The selling price must be allocated to determine the amount received for each class of asset. Irs amendments 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. Irs amendments (See chapter 8 for a discussion of capital assets and chapter 9 for a discussion of property used in the business. Irs amendments ) Separate computations must be made to figure the gain or loss for each class of asset sold. Irs amendments See Sale of a Farm in chapter 8. Irs amendments 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. Irs amendments See Depreciation recapture , later. Irs amendments This applies even if no payments are received in that year. Irs amendments Installment Method An installment sale is a sale of property where you receive at least one payment after the tax year of the sale. Irs amendments 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. Irs amendments See Inventory , later, for information on the sale of farm property where inventory items are included in the assets sold. Irs amendments 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. Irs amendments Electing out of the installment method. Irs amendments   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. Irs amendments   To make this election, do not report your sale on Form 6252. Irs amendments Instead, report it on Schedule D (Form 1040), Form 4797, or both. Irs amendments When to elect out. Irs amendments   Make this election by the due date, including extensions, for filing your tax return for the year the sale takes place. Irs amendments   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). Irs amendments Write “Filed pursuant to section 301. Irs amendments 9100-2” at the top of the amended return and file it where the original return was filed. Irs amendments Revoking the election. Irs amendments   Once made, the election can be revoked only with IRS approval. Irs amendments A revocation is retroactive. Irs amendments More information. Irs amendments   See Electing Out of the Installment Method in Publication 537 for more information. Irs amendments Inventory. Irs amendments   The sale of farm inventory items cannot be reported on the installment method. Irs amendments All gain or loss on their sale must be reported in the year of sale, even if you receive payment in later years. Irs amendments   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. Irs amendments If you do not, each payment must be allocated between the inventory and the other assets sold. Irs amendments Sale at a loss. Irs amendments   If your sale results in a loss, you cannot use the installment method. Irs amendments If the loss is on an installment sale of business assets, you can deduct it only in the tax year of sale. Irs amendments Figuring Installment Sale Income Each payment on an installment sale usually consists of the following three parts. Irs amendments Interest income. Irs amendments Return of your adjusted basis in the property. Irs amendments Gain on the sale. Irs amendments 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. Irs amendments You do not include in income the part that is the return of your basis in the property. Irs amendments Basis is the amount of your investment in the property for installment sale purposes. Irs amendments Interest income. Irs amendments   You must report interest as ordinary income. Irs amendments Interest is generally not included in a down payment. Irs amendments 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. Irs amendments Interest provided in the agreement is called stated interest. Irs amendments If the agreement does not provide for enough stated interest, there may be unstated interest or original issue discount. Irs amendments See Unstated interest , later. Irs amendments    You must continue to report the interest income on payments you receive in subsequent years as interest income. Irs amendments Adjusted basis and installment sale income (gain on sale). Irs amendments   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. Irs amendments A tax-free return of your adjusted basis in the property, and Your gain (referred to as “installment sale income” on Form 6252). Irs amendments Figuring adjusted basis for installment sale purposes. Irs amendments   You can use Worksheet 10-1 to figure your adjusted basis in the property for installment sale purposes. Irs amendments 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. Irs amendments    Worksheet 10-1. Irs amendments Figuring Adjusted Basis and Gross Profit Percentage 1. Irs amendments Enter the selling price for the property   2. Irs amendments Enter your adjusted basis for the property     3. Irs amendments Enter your selling expenses     4. Irs amendments Enter any depreciation recapture     5. Irs amendments Add lines 2, 3, and 4. Irs amendments  This is your adjusted basis  for installment sale purposes   6. Irs amendments Subtract line 5 from line 1. Irs amendments If zero or less, enter -0-. Irs amendments  This is your gross profit     If the amount entered on line 6 is zero, Stop here. Irs amendments You cannot use the installment method. Irs amendments   7. Irs amendments Enter the contract price for the property   8. Irs amendments Divide line 6 by line 7. Irs amendments This is your gross profit percentage   Selling price. Irs amendments   The selling price is the total cost of the property to the buyer and includes the following. Irs amendments Any money you are to receive. Irs amendments 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 ). Irs amendments 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). Irs amendments Any of your selling expenses the buyer pays. Irs amendments Do not include stated interest, unstated interest, any amount recomputed or recharacterized as interest, or original issue discount. Irs amendments Adjusted basis for installment sale purposes. Irs amendments   Your adjusted basis is the total of the following three items. Irs amendments Adjusted basis. Irs amendments Selling expenses. Irs amendments Depreciation recapture. Irs amendments Adjusted basis. Irs amendments   Basis is your investment in the property for installment sale purposes. Irs amendments The way you figure basis depends on how you acquire the property. Irs amendments The basis of property you buy is generally its cost. Irs amendments The basis of property you inherit, receive as a gift, build yourself, or receive in a tax-free exchange is figured differently. Irs amendments   While you own property, various events may change your original basis. Irs amendments Some events, such as adding rooms or making permanent improvements, increase basis. Irs amendments Others, such as deductible casualty losses or depreciation previously allowed or allowable, decrease basis. Irs amendments The result is adjusted basis. Irs amendments See chapter 6 and Publication 551, Basis of Assets, for more information. Irs amendments Selling expenses. Irs amendments   Selling expenses relate to the sale of the property. Irs amendments They include commissions, attorney fees, and any other expenses paid on the sale. Irs amendments Selling expenses are added to the basis of the sold property. Irs amendments Depreciation recapture. Irs amendments   If the property you sold was depreciable property, you may need to recapture part of the gain on the sale as ordinary income. Irs amendments See Depreciation Recapture in chapter 9 and Depreciation Recapture Income in Publication 537. Irs amendments Gross profit. Irs amendments   Gross profit is the total gain you report on the installment method. Irs amendments   To figure your gross profit, subtract your adjusted basis for installment sale purposes from the selling price. Irs amendments If the property you sold was your home, subtract from the gross profit any gain you can exclude. Irs amendments Contract price. Irs amendments   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. Irs amendments Gross profit percentage. Irs amendments   A certain percentage of each payment (after subtracting interest) is reported as installment sale income. Irs amendments This percentage is called the gross profit percentage and is figured by dividing your gross profit from the sale by the contract price. Irs amendments   The gross profit percentage generally remains the same for each payment you receive. Irs amendments However, see the example under Selling price reduced , later, for a situation where the gross profit percentage changes. Irs amendments Amount to report as installment sale income. Irs amendments   Multiply the payments you receive each year (less interest) by the gross profit percentage. Irs amendments The result is your installment sales income for the tax year. Irs amendments In certain circumstances, you may be treated as having received a payment, even though you received nothing directly. Irs amendments A receipt of property or the assumption of a mortgage on the property sold may be treated as a payment. Irs amendments For a detailed discussion, see Payments Received or Considered Received , later. Irs amendments Selling price reduced. Irs amendments   If the selling price is reduced at a later date, the gross profit on the sale also will change. Irs amendments You then must refigure the gross profit percentage for the remaining payments. Irs amendments Refigure your gross profit using Worksheet 10-2. Irs amendments New Gross Profit Percentage — Selling Price Reduced. Irs amendments You will spread any remaining gain over future installments. Irs amendments    Worksheet 10-2. Irs amendments New Gross Profit Percentage — Selling Price Reduced 1. Irs amendments Enter the reduced selling  price for the property   2. Irs amendments Enter your adjusted  basis for the  property     3. Irs amendments Enter your selling  expenses     4. Irs amendments Enter any depreciation  recapture     5. Irs amendments Add lines 2, 3, and 4. Irs amendments   6. Irs amendments Subtract line 5 from line 1. Irs amendments  This is your adjusted  gross profit   7. Irs amendments Enter any installment sale  income reported in  prior year(s)   8. Irs amendments Subtract line 7 from line 6   9. Irs amendments Future installments     10. Irs amendments Divide line 8 by line 9. Irs amendments  This is your new  gross profit percentage*. Irs amendments   * Apply this percentage to all future payments to determine how much of each of those payments is installment sale income. Irs amendments Example. Irs amendments In 2011, you sold land with a basis of $40,000 for $100,000. Irs amendments Your gross profit was $60,000. Irs amendments You received a $20,000 down payment and the buyer's note for $80,000. Irs amendments The note provides for monthly payments of $1,953 each, figured at 8% interest, amortized over four years, beginning in January 2012. Irs amendments Your gross profit percentage was 60%. Irs amendments 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. Irs amendments You reported a gain of $12,000 on the down payment received in 2011 and $10,605 ($17,675 X 60% (. Irs amendments 60)) in 2012. Irs amendments 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. Irs amendments The new gross profit percentage, 47. Irs amendments 32%, is figured in Example — Worksheet 10-2. Irs amendments Example — Worksheet 10-2. Irs amendments New Gross Profit Percentage — Selling Price Reduced 1. Irs amendments Enter the reduced selling  price for the property 85,000 2. Irs amendments Enter your adjusted  basis for the  property 40,000   3. Irs amendments Enter your selling  expenses -0-   4. Irs amendments Enter any depreciation  recapture -0-   5. Irs amendments Add lines 2, 3, and 4. Irs amendments 40,000 6. Irs amendments Subtract line 5 from line 1. Irs amendments  This is your adjusted  gross profit 45,000 7. Irs amendments Enter any installment sale  income reported in  prior year(s) 22,605 8. Irs amendments Subtract line 7 from line 6 22,395 9. Irs amendments Future installments   47,325 10. Irs amendments Divide line 8 by line 9. Irs amendments  This is your new  gross profit percentage*. Irs amendments 47. Irs amendments 32% * Apply this percentage to all future payments to determine how much of each of those payments is installment sale income. Irs amendments You will report installment sale income of $6,878 (47. Irs amendments 32% of $14,535) in 2013, $7,449 (47. Irs amendments 32% of $15,742) in 2014, and $8,067 (47. Irs amendments 32% of $17,048) in 2015. Irs amendments Form 6252. Irs amendments   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. Irs amendments Attach it to your tax return for each year. Irs amendments 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. Irs amendments It is considered gain or loss on the sale of the property for which you received the installment obligation. Irs amendments Cancellation. Irs amendments   If an installment obligation is canceled or otherwise becomes unenforceable, it is treated as a disposition other than a sale or exchange. Irs amendments 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. Irs amendments If the parties are related, the FMV of the obligation is considered to be no less than its full face value. Irs amendments Transfer due to death. Irs amendments   The transfer of an installment obligation (other than to a buyer) as a result of the death of the seller is not a disposition. Irs amendments Any unreported gain from the installment obligation is not treated as gross income to the decedent. Irs amendments No income is reported on the decedent's return due to the transfer. Irs amendments 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. Irs amendments   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. Irs amendments The estate must figure its gain or loss on the disposition. Irs amendments 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. Irs amendments More information. Irs amendments   For more information on the disposition of an installment obligation, see Publication 537. Irs amendments Sale of depreciable property. Irs amendments   You generally cannot report gain from the sale of depreciable property to a related person on the installment method. Irs amendments See Sale to a Related Person in Publication 537. Irs amendments   You cannot use the installment method to report any depreciation recapture income up to the gain on the sale. Irs amendments However, report any gain greater than the recapture income on the installment method. Irs amendments   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. Irs amendments   Figure your depreciation recapture income (including the section 179 deduction and the section 179A deduction recapture) in Part III of Form 4797. Irs amendments Report the depreciation recapture income in Part II of Form 4797 as ordinary income in the year of sale. Irs amendments    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. Irs amendments See the Form 6252 instructions for details. Irs amendments   For more information on the section 179 deduction, see Section 179 Expense Deduction in chapter 7. Irs amendments For more information on depreciation recapture, see Depreciation Recapture in  chapter 9. Irs amendments 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. Irs amendments In certain situations, you are considered to have received a payment, even though the buyer does not pay you directly. Irs amendments 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. Irs amendments 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. Irs amendments Buyer pays seller's expenses. Irs amendments   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. Irs amendments Include these expenses in the selling and contract prices when figuring the gross profit percentage. Irs amendments Buyer assumes mortgage. Irs amendments   If the buyer assumes or pays off your mortgage, or otherwise takes the property subject to the mortgage, the following rules apply. Irs amendments Mortgage less than basis. Irs amendments   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. Irs amendments It is considered a recovery of your basis. Irs amendments The contract price is the selling price minus the mortgage. Irs amendments Example. Irs amendments You sell property with an adjusted basis of $19,000. Irs amendments You have selling expenses of $1,000. Irs amendments 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). Irs amendments The selling price is $25,000 ($15,000 + $10,000). Irs amendments Your gross profit is $5,000 ($25,000 − $20,000 installment sale basis). Irs amendments The contract price is $10,000 ($25,000 − $15,000 mortgage). Irs amendments Your gross profit percentage is 50% ($5,000 ÷ $10,000). Irs amendments You report half of each $2,000 payment received as gain from the sale. Irs amendments You also report all interest you receive as ordinary income. Irs amendments Mortgage more than basis. Irs amendments   If the buyer assumes a mortgage that is more than your installment sale basis in the property, you recover your entire basis. Irs amendments The part of the mortgage greater than your basis is treated as a payment received in the year of sale. Irs amendments   To figure the contract price, subtract the mortgage from the selling price. Irs amendments This is the total amount (other than interest) you will receive directly from the buyer. Irs amendments Add to this amount the payment you are considered to have received (the difference between the mortgage and your installment sale basis). Irs amendments The contract price is then the same as your gross profit from the sale. Irs amendments    If the mortgage the buyer assumes is equal to or more than your installment sale basis, the gross profit percentage always will be 100%. Irs amendments Example. Irs amendments The selling price for your property is $9,000. Irs amendments The buyer will pay you $1,000 annually (plus 8% interest) over the next 3 years and assume an existing mortgage of $6,000. Irs amendments Your adjusted basis in the property is $4,400. Irs amendments You have selling expenses of $600, for a total installment sale basis of $5,000. Irs amendments The part of the mortgage that is more than your installment sale basis is $1,000 ($6,000 − $5,000). Irs amendments This amount is included in the contract price and treated as a payment received in the year of sale. Irs amendments 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%. Irs amendments Report 100% of each payment (less interest) as gain from the sale. Irs amendments 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. Irs amendments Buyer assumes other debts. Irs amendments   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. Irs amendments   If the buyer assumes the debt instead of paying it off, only part of it may have to be treated as a payment. Irs amendments Compare the debt to your installment sale basis in the property being sold. Irs amendments If the debt is less than your installment sale basis, none of it is treated as a payment. Irs amendments If it is more, only the difference is treated as a payment. Irs amendments 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. Irs amendments These rules are the same as the rules discussed earlier under Buyer assumes mortgage . Irs amendments However, they apply only to the following types of debt the buyer assumes. Irs amendments Those acquired from ownership of the property you are selling, such as a mortgage, lien, overdue interest, or back taxes. Irs amendments Those acquired in the ordinary course of your business, such as a balance due for inventory you purchased. Irs amendments   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. Irs amendments The value of the assumed debt is then considered a payment to you in the year of sale. Irs amendments Property used as a payment. Irs amendments   If you receive property rather than money from the buyer, it is still considered a payment in the year received. Irs amendments However, see Trading property for like-kind property , later. Irs amendments Generally, the amount of the payment is the property's FMV on the date you receive it. Irs amendments Exception. Irs amendments   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. Irs amendments See Unstated interest , later. Irs amendments Examples. Irs amendments 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. Irs amendments 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. Irs amendments In these examples, use the above rules to determine the amount you should consider as payment in the year received. Irs amendments Debt not payable on demand. Irs amendments   Any evidence of debt you receive from the buyer that is not payable on demand is not considered a payment. Irs amendments This is true even if the debt is guaranteed by a third party, including a government agency. Irs amendments Fair market value (FMV). Irs amendments   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. Irs amendments Third-party note. Irs amendments   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. Irs amendments 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. Irs amendments The excess of the note's face value over its FMV is interest. Irs amendments Exclude this interest in determining the selling price of the property. Irs amendments However, see Exception under Property used as a payment , earlier. Irs amendments Example. Irs amendments You sold real estate in an installment sale. Irs amendments As part of the down payment, the buyer assigned to you a $50,000, 8% third-party note. Irs amendments The FMV of the third-party note at the time of the sale was $30,000. Irs amendments This amount, not $50,000, is a payment to you in the year of sale. Irs amendments 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. Irs amendments The remaining 40% is interest taxed as ordinary income. Irs amendments Bond. Irs amendments   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. Irs amendments For more information on the amount you should treat as a payment, see Exception under Property used as a payment , earlier. Irs amendments   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. Irs amendments However, see Exception under Property used as a payment , earlier. Irs amendments Buyer's note. Irs amendments   The buyer's note (unless payable on demand) is not considered payment on the sale. Irs amendments However, its full face value is included when figuring the selling price and the contract price. Irs amendments Payments you receive on the note are used to figure your gain in the year received. Irs amendments Sale to a related person. Irs amendments   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. Irs amendments For information on these rules, see the Instructions for Form 6252 and Sale to a Related Person in Publication 537. Irs amendments Trading property for like-kind property. Irs amendments   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. Irs amendments See Like-Kind Exchanges in chapter 8 for a discussion of like-kind property. Irs amendments   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. Irs amendments The contract price is reduced by the FMV of the like-kind property received in the trade. Irs amendments The gross profit is reduced by any gain on the trade that can be postponed. Irs amendments Like-kind property received in the trade is not considered payment on the installment obligation. Irs amendments Unstated interest. Irs amendments   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. Irs amendments Interest provided in the contract is called stated interest. Irs amendments   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. Irs amendments If Internal Revenue Code section 483 applies to the contract, this interest is called unstated interest. Irs amendments   If Internal Revenue Code section 1274 applies to the contract, this interest is called original issue discount (OID). Irs amendments   Generally, if a buyer gives a debt in consideration for personal use property, the unstated interest rules do not apply. Irs amendments Therefore, the buyer cannot deduct the unstated interest. Irs amendments The seller must report the unstated interest as income. Irs amendments 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. Irs amendments   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. Irs amendments   Unstated interest reduces the stated selling price of the property and the buyer's basis in the property. Irs amendments It increases the seller's interest income and the buyer's interest expense. Irs amendments   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). Irs amendments    The AFRs are published monthly in the Internal Revenue Bulletin (IRB). Irs amendments You can get this information by contacting an IRS office. Irs amendments IRBs are also available at IRS. Irs amendments gov. Irs amendments More information. Irs amendments   For more information, see Unstated Interest and Original Issue Discount (OID) in Publication 537. Irs amendments Example. Irs amendments You sell property at a contract price of $6,000 and your gross profit is $1,500. Irs amendments Your gross profit percentage is 25% ($1,500 ÷ $6,000). Irs amendments 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. Irs amendments The remainder (balance) of each payment is the tax-free return of your adjusted basis. Irs amendments Example On January 3, 2013, you sold your farm, including the home, farm land and buildings. Irs amendments You received $50,000 down and the buyer's note for $200,000. Irs amendments In addition, the buyer assumed an outstanding $50,000 mortgage on the farm land. Irs amendments The total selling price was $300,000. Irs amendments The note payments of $25,000 each, plus adequate interest, are due every July 1 and January 1, beginning in July 2013. Irs amendments Your selling expenses were $15,000. Irs amendments Adjusted basis and depreciation. Irs amendments   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. Irs amendments   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. Irs amendments The selling expense for each asset is 5% of the selling price ($15,000 selling expense ÷ $300,000 selling price). Irs amendments   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. Irs amendments   The buildings are section 1250 property. Irs amendments There is no depreciation recapture income for them because they were depreciated using the straight line method. Irs amendments See chapter 9 for more information on depreciation recapture. Irs amendments   Special rules may apply when you sell section 1250 assets depreciated under the straight line method. Irs amendments See the Unrecaptured Section 1250 Gain Worksheet in the Instructions for Schedule D (Form 1040). Irs amendments See chapter 3 of Publication 544, Sales and Other Dispositions of Assets, for more information on section 1250 assets. Irs amendments Installment sale basis and gross profit. Irs amendments   The following table shows each asset reported on the installment method, its selling price, installment sale basis, and gross profit. Irs amendments     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. Irs amendments   The gain on the farm land and buildings is reported as section 1231 gains. Irs amendments See Section 1231 Gains and Losses in chapter 9. Irs amendments Contract price and gross profit percentage. Irs amendments   The contract price is $250,000 for the part of the sale reported on the installment method. Irs amendments This is the selling price ($300,000) minus the mortgage assumed ($50,000). Irs amendments   Gross profit percentage for the sale is 47. Irs amendments 70% ($119,260 gross profit ÷ $250,000 contract price). Irs amendments The gross profit percentage for each asset is figured as follows:   Percent Farm land ($83,140 ÷ $250,000) 33. Irs amendments 256 Buildings ($36,120 ÷ $250,000) 14. Irs amendments 448 Total 47. Irs amendments 70 Figuring the gain to report on the installment method. Irs amendments   One hundred percent (100%) of each payment is reported on the installment method. Irs amendments The total amount received on the sale in 2013 is $75,000 ($50,000 down payment + $25,000 payment on July 1). Irs amendments The installment sale part of the total payments received in 2013 is also $75,000. Irs amendments Figure the gain to report for each asset by multiplying its gross profit percentage times $75,000. Irs amendments   Income Farm land—33. Irs amendments 256% × $75,000 $24,942 Buildings—14. Irs amendments 448% × $75,000 10,836 Total installment income for 2013 $35,778 Reporting the sale. Irs amendments   Report the installment sale on Form 6252. Irs amendments Then report the amounts from Form 6252 on Form 4797 and Schedule D (Form 1040). Irs amendments Attach a separate page to Form 6252 that shows the computations in the example. Irs amendments 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. Irs amendments Section 1231 gains. Irs amendments   The gains on the farm land and buildings are section 1231 gains. Irs amendments They may be reported as either capital or ordinary gain depending on the net balance when combined with other section 1231 losses. Irs amendments A net 1231 gain is capital gain and a net 1231 loss is an ordinary loss. Irs amendments Installment income for years after 2013. Irs amendments   You figure installment income for the years after 2013 by applying the same gross profit percentages to the payments you receive each year. Irs amendments If you receive $50,000 during the year, the entire $50,000 is considered received on the installment sale (100% × $50,000). Irs amendments You realize income as follows:   Income Farm land—33. Irs amendments 256% × $50,000 $16,628 Buildings—14. Irs amendments 448% × $50,000 7,224 Total installment income $23,852   In this example, no gain ever is recognized from the sale of your home. Irs amendments 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. Irs amendments The interest received with each payment will be included in full as ordinary income. Irs amendments Summary. Irs amendments   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. Irs amendments 70% 23,850 Gain reported in 2014:   $50,000 × 47. Irs amendments 70% 23,850 Gain reported in 2015:   $50,000 × 47. Irs amendments 70% 23,850 Gain reported in 2016:   $25,000 × 47. Irs amendments 70% 11,925 Total gain reported $119,253 Prev  Up  Next   Home   More Online Publications
Español

National Highway Traffic Safety Administration

The National Highway Traffic Safety Administration (NHTSA) is responsible for reducing deaths, injuries and economic losses resulting from motor vehicle crashes. The agency investigates safety defects in motor vehicles, sets and enforces fuel economy standards, helps states and local communities reduce the threat of drunk drivers, promotes the use of safety belts, child safety seats and air bags, investigates odometer fraud, establishes and enforces vehicle anti-theft regulations, conducts research on driver behavior and traffic safety, and provides consumer information on motor vehicle safety topics.

Contact the Agency or Department

Website: National Highway Traffic Safety Administration

Contact In-Person: Child Car Seat Fitting Station Locator

Address: 1200 New Jersey Avenue, SE
West Building

Washington, DC 20590

Phone Number: (202) 366-4000 (Department of Transportation Switchboard)

Toll-free: (888) 327-4236

TTY: (800) 424-9153

The Irs Amendments

Irs amendments Publication 523 - Additional Material Prev  Up  Next   Home   More Online Publications