Real Estate Contract

[Burke]

S's tax return includes an Installment Sale form so that principal paid for the year reduces the principal of the loan and interest is reported on Sch B.

I am not sure I agree with this particular part. Why would you do an Installment Sale form (I assume you are talking Form 6252?) for property sold at a loss? Or maybe you are referring to a worksheet of some sort.

[taxea]

Great job writing it up step by step.

Given what we know, I don't think S is actually required to issue a 1098 (being neither a lender nor in the trade or business of selling real estate). That doesn't make it a bad idea, though, as it will help ensure that the amounts they each report match up.

You are correct but the S should provide the buyer with a statement that details how much principal and interest was paid during the year.

Burke-you do the form to report the interest received on the agreement. The instructions tell you what lines you need to complete.

[WhiteOleander]

Burke-you do the form to report the interest received on the agreement. The instructions tell you what lines you need to complete.

You are incorrect. The instructions for form 6252 specifically state that you do not file the form if the property is sold at a loss. You do not report interest payments received on a 6252.

[DONNA ASTON]

I don't either it is a loss. I did not include a 6252 in my tax return.

[taxea]

even if there is a gross 1099 issued?

[Burke]

The interest would go directly to Sche B based on the amortization schedule. Note that Form 6252 does not provide for any interest figures, only principal to determine the amount of gain which goes to Sche D. Line 21 says "do not include interest whether stated or unstated." If there were a 1099 issued for some reason (not usual) then it would match to Schedule B.