Can a tp in year 6 of an installment loan declare on their 1040 the full amount of unpaid principle, thus reporting interest only in future years?
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Wouldn't the principal amount actually have been used as depreciation? You don't deduct principle. -
If you are reporting an Installment Sale on Form 6252, you can only claim the taxable income if they actually received the payment. You can't claim income if they did not actually receive it.
If they actually received the full payments, there would no longer be any interest.Comment
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If I'm reading this correctly, we haven't grasped the impact of the original question.
After setting up under an installment plan for a few years, can the lender "opt out" of installment treatment in future years by declaring all payments in a current year? And can this be done even though the payments are continuing under the original installment agreement?
There might be strategic reasons for doing this. The current year may have been a very bad year with low taxation, such that absorbing the remaining income makes sense.
Seems like I remember a check box, where a lender can do this, but he (she) has to claim all remaining receipts (including interest) and apply the entire amount subject to the applicable percentage.Comment
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Tax4US asked essentially this same question 2 months ago.
"You said it, they'll never know the difference. Come on, we'll paint our way out!" - Moe Howard
"That's enough! When you didn't know what you were talking about, you really had something! [to Curly]" -Moe HowardComment
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My associate was trying to clear his plate not realizing that I had posted this before. The money trail (tp took his own money, acted like he paid it off, rewrote the deed of trust note taking spouse's name off deed of trust , then got his money back. (Same amount)l lead me to this is not a true payoff. So I will continue the sale onwards and let the heirs decipher what they are going to do as both TP and spouse are now deceased.Comment
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