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Sale of Rental Property

Jerry C
Level 3

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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5 Comments 5
TaxGuyBill
Level 15

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.

Jerry C
Level 3

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 

sjrcpa
Level 15

If you are making accounting entries there is now a Loan Receivable. Principal payments received reduce this receivable.

The more I know, the more I don't know.
Jerry C
Level 3

not making accounting entries.

This question was relating to the preparation of the tax return going forward

 

Thanks for the reply

 

TaxGuyBill
Level 15

My original answer still applies.