Sale of Rental Property to the Renters

[tsuewalker]

Client was renting a property to a family and they bought the home on 03/31/15. My client is carrying the mortgage for 3 years and 3 years only. The buyers must secure other financing by then. My client received $7302 in principal payments and received interest of $3617. Do the "principal payments" go on the tax return anywhere? Also, is this considered an installment sale and is there a form I need to fill out to report that "principal" income.

This is a first for me so thank you so very much for any help you can give me. It's going to be a learning experience for me!

[ATSMAN]

I had a client do seller financing for his home (not rental property). The interest income received on the note is reported as interest income on 1040. The principal payment is not reported anywhere.

I would assume it should work the same way if you sold a rental property.

[TaxGuyBill]

If it was sold at a gain the taxpayer is not choosing to report the entire sale this year, it is reported as an installment sale. Principal payments go on Line 21 of Form 6252.

As was mentioned, the interest payments are entered on Line 8a of the 1040.

[taxmom34]

this is rental property, form 4797 also has to be filled out along with the installment sale form 6252. how did you arrive at basis for the property? and the depreciation taken for ? years.

[tsuewalker]

The basis was the appraised amt. Term was 27.5 years.

[taxea]

I don't believe the assessed amount would be the correct amount to take as the basis.

[tsuewalker]

$300K is the basis that I've been depreciating.

[Lion]

Your basis = cost + improvements - depreciation. The short answer. As you've been told: 4797 and 6252 installment sale. Depending on how helpful your software is, you might need to work out the forms in pencil before inputting into your software.