IRS Form 6252 Installment Sale Income

What Is Form 6252 Used For?

If you disposed of real estate or personal property yet you did not receive the full amount of its value from the purchaser right away, it means you and the other party have opted for an installment method of payment and you have to file a 6252 Tax Form. Even in case only one of the installment payments takes place during the tax year covered by this form, you need to let the IRS know you disposed of the property and received money from an individual or organization that purchased it since you are obliged to report the financial gain as a part of your income in the course of the year.

Note that you are not required to submit this statement if you sold securities or stock - those types of transactions are considered finalized in the year they were made. Besides, no matter the type of property you sold, if the transaction did not lead to any financial gain, you do not have to file Form 6252 - the requirement only applies to individuals and entities that acquired the income after selling the property for higher than they originally paid for it.

Form 6252 Instructions

IRS Form 6252 instructions are as follows:

1. State your full name and taxpayer identification number - note that the name has to match the one you include on your regular income statement . Describe the property in question - you have to provide a brief summary that will allow the authorities to identify the property without an issue. Add the date you got the property and the date you disposed of it.

2. Check the box in case the transaction occurred between related parties . The definition of "related party" will include your closest family members such as your spouse, children, and parents as well as partnerships, estates, and corporations your entity is related to. If you put a tick in the box, make sure you fill out the third part of the form before submitting the paperwork.

3. Compute the gross profit you have made from the sale and indicate the price of the contract . Take mortgages and other applicable debts into account before you start making necessary computations. Mention the depreciation of property if you got rid of real estate, list the amount of commissions and related costs, and follow the formulas provided by the form to report the profit and price accurately.

4. Specify the percentage of the gross profit, state the amount of payments you received from the buyer throughout the year and the amount you got in previous years you filed the same form, and figure out the total income of the installment sale.

5. Complete the last part of the document only if you entered into an agreement with someone related to you - there is no need to fill out this section if you got the last payment during the year described in the present form. Identify the related party, list the details of the disposition, and calculate the income you were able to generate.

6. It is advised to put a reminder for the upcoming years when you will get future installment payments so that you do not forget to use this form again and let the IRS know about the financial gain you keep making in regard to the property described in the papers.