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Taxes: Form 6252 and Form 4797. Installment sale reporting

Before completing form 6252 and 4797 for an installment sale of real property, the tax professional would manually

A. Determine the gain on the sale for each year of the installment sale
B. Determine the return of capital and installment of gain on the sale
C. Determine the interest to be paid for each year of the installment sale
D. Allocate the expenses of sale, principal in year of sale and assumed mortgage between the building and the land

Which of the following taxpayers would be likely to benefit from an installment sale. A taxpayer who sold

A. Investment use land, sold for gain
B. A business use car sold at net gain which was less than the amount of depreciation claimed
C. Rental property sold at a gain less than the amount of depreciation allowed
D. A fishing boat sold at a net loss

Solution Preview

Before completing the Form 6252 and Form 4797:

A. There is no reason to schedule the reporting for each year of the installment sale because the buyer may not pay according to the schedule. Taxable gain is calculated based on the principal amount paid, not the forecasted amount.

B. This is the procedure to determine the amount of taxable gain. The total payments must first be allocated ...

Solution Summary

The 261 word solution carefully explains each part of the multiple choice questions as to why it does or does not apply.