Garnishment of installment payments

[Weinhart]

Client is judgment debtor in civil proceeding. Judgment creditor garnished the payments on an installment sale by client to 3rd party and principal and interest payments are being made to creditor through servicing agent. Would the installment payments have to continue to be reported by client debtor on 6252 even though nothing was received or is it taxable constructive receipt and treated as simply debt collection? Anything taxable to creditor or debtor?

[sjrcpa · Accepted solution]

is it taxable constructive receipt and treated as simply debt collection?

Yes. Taxable installment sale proceeds to your client.

[Weinhart]

Thanks.

Do you think that it is also taxable to the creditor?

[BobKamman]

Not really your problem, is it, if you really have a client and are not asking just out of idle curiosity?