Installment sale of rental property. Sold at loss.

[PATAX]

Client has many installment sales (6252) over the years and never any issue because all of them were sold at a gain. But now he has sold one at a loss, and software states when I try to link rental assets to 6252: "form 6252 link should be blank. Sale does not qualify for the installment method because asset sold at loss." the entire amount of loss flows to form 4797, Part I (even though client will receive payments in future). Is this correct? If so, then in future no loss will be deducted for "principal" portion of installment payments received, and interest income will be reported as received each year in future? is this correct, or am I missing something? Thanks a million.

[rbynaker · Accepted solution]

Yeah, installment sales are a "taxpayer friendly" provision to defer taxable gains.  Take the loss up front (and then potentially make an adjustment later if the taxpayer needs to repo).  Interest will be taxable as it comes in.

[PATAX]

@rbynaker 👍Thanks a million Rick. I really appreciate it. 

[IRonMaN]

Can Rick expect a check for that million, or will you be paying him on the installment basis for that good advice?  😉

[PATAX]

@IRonMaN 👍I dont have a million - Heidi is bankrupting me with expensive nonstop treats that I have to give her. (no treats made overseas for Heidi). 🐶☝️ I have to take her for walk now.

[IRonMaN]

Those furry employees can be expensive.

[PATAX]

@IRonMaN 👍but they are worth every penny. They are man's best friend.

[IRonMaN]

That they are.