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Who Has Free State Tax Filing

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Who Has Free State Tax Filing

Who has free state tax filing Index A Additional Medicare Tax, Reminders, Additional Medicare Tax withholding. Who has free state tax filing Aliens, nonresident, Withholding income taxes on the wages of nonresident alien employees. Who has free state tax filing , Withholding adjustment for nonresident alien employees. Who has free state tax filing Assistance (see Tax help) C COBRA premium assistance credit, Reminders COBRA Premium Assistance Credit, COBRA premium assistance credit. Who has free state tax filing Commodity wages, Commodity wages. Who has free state tax filing Crew leaders, Crew Leaders, 10. Who has free state tax filing Federal Unemployment (FUTA) Tax D Deposit Penalties, Deposit Penalties Deposit rules Electronic funds transfer, 7. Who has free state tax filing Depositing Taxes Lookback period, Lookback period. Who has free state tax filing Differential wage payments, Reminders Disregarded entities, Reminders E Electronic deposits, Electronic deposit requirement. Who has free state tax filing Electronic payment, Reminders Electronic reporting, Calendar Employee defined, 2. Who has free state tax filing Who Are Employees? Employer identification number (EIN), Employer identification number (EIN). Who has free state tax filing Employers of farmworkers, 2. Who has free state tax filing Who Are Employees? Exemption from withholding, Exemption from federal income tax withholding. Who has free state tax filing F Farmworkers Crew leaders, Crew Leaders Defined, 2. Who has free state tax filing Who Are Employees? Federal unemployment (FUTA) taxes, 10. Who has free state tax filing Federal Unemployment (FUTA) Tax Forms 843, Form 843. Who has free state tax filing 940, 10. Who has free state tax filing Federal Unemployment (FUTA) Tax 943, 8. Who has free state tax filing Form 943 943-X, Prior Year Adjustments I-9, Reminders W-2, Filing corrections to Forms W-2 and W-3. Who has free state tax filing W-4, Reminders, Form W-4. Who has free state tax filing W-4(SP), Reminders, Form W-4. Who has free state tax filing H H-2A visa holders, Compensation paid to H-2A visa holders. Who has free state tax filing Household employees Employment tax withholding, Household employees. Who has free state tax filing I Income tax withholding How to figure, How To Figure Federal Income Tax Withholding Percentage method, 13. Who has free state tax filing Federal Income Tax Withholding Methods Wage bracket method, 13. Who has free state tax filing Federal Income Tax Withholding Methods Who must withhold, 5. Who has free state tax filing Federal Income Tax Withholding Independent contractor, 2. Who has free state tax filing Who Are Employees? L Lookback period, Lookback period. Who has free state tax filing N Noncash wages, Commodity wages. Who has free state tax filing P Penalties, Deposit Penalties Prior year adjustments, Prior Year Adjustments Publications (see Tax help) Q Qualified subchapter S subsidiaries (QSubs), Reminders R Reconciling Forms W-2, W-3, and 943, 11. Who has free state tax filing Reconciling Wage Reporting Forms Reconciling wage reporting forms, 11. Who has free state tax filing Reconciling Wage Reporting Forms S Share farmers, Share farmers. Who has free state tax filing Social security and Medicare withholding, 4. Who has free state tax filing Social Security and Medicare Taxes Social security number (SSN), Social security number (SSN). Who has free state tax filing Spouses who own and operate a business together , Business Owned and Operated by Spouses Supplemental wages, Supplemental wages. Who has free state tax filing T Tax help, How To Get Tax Help Taxpayer identification number, 1. Who has free state tax filing Taxpayer Identification Numbers Trust fund recovery penalty, Trust fund recovery penalty. Who has free state tax filing TTY/TDD information, How To Get Tax Help W Withholding Income tax, 5. Who has free state tax filing Federal Income Tax Withholding Nonresident aliens, Withholding adjustment for nonresident alien employees. Who has free state tax filing Supplemental wages, Supplemental wages. Who has free state tax filing Prev  Up     Home   More Online Publications
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Tax Counseling for the Elderly

The Tax Counseling for the Elderly (TCE) program offers FREE tax help to individuals who are age 60 or older. Cooperative grant agreements are entered into between IRS and eligible organizations to provide tax assistance to elderly taxpayers. The funds provided by the IRS are used by organizations to reimburse volunteers for their out-of-pocket expenses; including transportation, meals and other expenses incurred by them in providing tax counseling assistance at locations convenient to the taxpayers.  

Tax return preparation assistance is provided to elderly taxpayers during the normal period for filing Federal income tax returns, which is from January 1 to April 15 each year. However, the program activities required to make sure elderly taxpayers receive efficient and quality tax assistance can be conducted year-round.

A sponsor awarded a grant is responsible for all aspects of operating the TCE program including, but not limited to publicity, recruitment, training, site selection and management of volunteers.  

Section 163 of the Revenue Act of 1978, Public Law No. 95-600, 92 Stat. 2810, November 6, 1978, authorizes IRS to enter into cooperative agreements.

This web page serves as a resource for organizations interested in applying for a TCE grant as well as for organizations who have been awarded a grant.

Select from the following categories to get started:

 

Contact the TCE Grant Program at tce.grant.office@irs.gov

Page Last Reviewed or Updated: 11-Sep-2013

The Who Has Free State Tax Filing

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