Mind is mush

[lsmith]

Client sold 1/2 of building that rents office space.
Received 75,000 less his half of commissions. Will receive 1000. per month for 60 months with baloon at the end for the the 60 months.
I'm thinking use 6252, 4797, d and b. Client does not want to pay taxes on the entire sale but only what he receives, when he receives it. Am I off base anywhere here? Total sale of his half is $275,000. The building was placed into service in the early 80's.

[BOB W]

Installment sale ......

..... is OK, but 1250 property depreciation must be recaptured in the year of sale. Your client will not be happy but that is the way it goes.

[lsmith]

mind is mush

that is a given.

[Matt Sova]

6252

He can use the 6252, but as Bob stated he has to recapture the depreciation this year.

[lsmith]

Mind is Mush

I know that, that is the reason I mentioned the 4797. My concern is only two entries on the 6252 (first and last, 5 years later). I have never done that with interest in the intervening years and a baloon at the end.

[BOB W]

You would.....

..... file the 6252 for each year even if no current principle was paid during the "interest only" years. Watch in the fifth year that you take into account the already recaptured depreciation from the money collected at that time.

[Davc]

Would everyone please take a moment to read pages 8 & 9 of the 4797 instructions. Unrecaptured 1250 gain is recognized first on an installment sale, but not recaptured in the year of sale. Due to the indicated date of "placed in service" the property may be 1245 property in which case it's not 1250 gain and is recaptured in the year of sale.