Can a tp after carrying an installment sale (6252) after 5 years elect to report the remainder income in current year even though tp did not get the funds?
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Revoking the election.
Once made, the election can be revoked only with IRS approval. A revocation is retroactive. You won’t be allowed to revoke the election if either of the following applies.- One of the purposes is to avoid federal income tax.
- The tax year in which any payment was received has closed.
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I must be missing something.
On the surface, this seems to be a rather questionable scenario, both for the tax client and for the tax pro who prepares/signs the return.
OTOH, I guess the folks in DC will never turn down some extra taxpayer payments. . .
(So, what happens in the year when the income REALLY shows up? ? ?)Comment
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Turns out TP wants to pay the tax now so that possible heirs will not have to continue with installment sale, just continue to report the interest as received. I now have 2 of these dang things with different pictures involved. Sale occurred 5 years ago.Comment
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Took me a moment to understand this was about recognizing taxable income before it is realized. (I thought it was about how the buyer could always pay off the balance due in any year without waiting for the end of the agreed term).
"Turns out TP wants to pay the tax now so that possible heirs will not have to continue with installment sale, just continue to report the interest as received."
My antenna goes up immediately upon encountering the phase "possible heirs". (assuming it was the taxpayer, not the OP, who first used the term). Tell this person to go find a financial and estate planner, surely there are better and more flexible ways to pass wealth on to younger generations than trying to jury-rig in violation of the law an uncommon provision of the tax code (by uncommon I mean, it does not show up on the vast majority of tax returns)."You said it, they'll never know the difference. Come on, we'll paint our way out!" - Moe HowardComment
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I remain confused.
Does he want to report income he has not yet received, and then **NOT** report the income when he does receive it later?
I would have a hard time signing my name to either of those tax returns!)
The Form 6252, if properly drawn up at its inception, will generate all of the numbers ever needed. Gross principal receipts, grpss profit percentage, and taxable amount for Sch D or whatever. There is NOTHING binding on the tax document to preclude early (or even non-) payments. Plug in the payments received, and let 'er rip. (This does assume you were already calculating separate interest charges, as determining any imputed / unstated interest along the way is a major chore.)Comment
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