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Client sold rental property during the year and is holding the Mortgage with the Buyer.
When using the Installment method, The overall Value, Basis is a lost and normally you can't use the Installment method when there is no Profit. How do I present this on the return for 2020 and how do I record the principle payments going forward since there is no
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If the rental property was sold at a loss, just report the sale of the rental property in the year it was sold.
There is no need to report the payments of Principal. Just report any interest received.
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Thank you TaxGuyBill.
But if the client is still holding the mortgage going forward, I Know I have to report the Interest, But what happens to the Principle payment. There is no Loan/Payable to offset. So at this point does the client holding the mortgage just pocket the principle and not report?
thanks for your advice
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If you are making accounting entries there is now a Loan Receivable. Principal payments received reduce this receivable.
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not making accounting entries.
This question was relating to the preparation of the tax return going forward
Thanks for the reply
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My original answer still applies.