Question on how to treat

[JG EA]

an installment sale that was originally $190000. $100000 principal sold for $70000 (with the client getting a remainder interest of $90000). The company buying will take 100000 in principal before the client takes back the installment sale. It is not structured as a loan as we had originally thought it would be. It is clearly a sale and the escrow company has reassigned the taxable interest, etc to the buying company.

What would be the basis? Would it possibly be a sale of a note for a loss?

[OldJack]

I am pretty sure I don't understand the sale and buy back deal so I can't really answer your question. I am not sure that your client ends up with any qualified installment sale for anything after the deal. As you know there is always more than one way to look at this type problem. Some would say make your adjustments on form 6252 and others would say drop form 6252 and report on form 4797 (business) or Sch-D (personal).

Basically, one simple way is to revisit your original installment sale numbers using the current sale price and installment taxable gains that have been recognized adding to cost. You then have the accurate gain or loss to report in the current year. Not sure if any of this is right for your situation but hope it helps.

[JG EA]

Thank you,

Yes, it helps because I hadn't thought about it not being a qualified installment sale after. That makes sense. I shutter at the thought of it all being taxable this year, but that would solve my problem with understanding the basis anyway.

Thank you,

PS: It wasn't supposed to be a reassignment, it was supposed to just be a loan. It came through a completely different way than the clients thought (but they did sign the papers).