Installment Sale

[quicksam]

Under the general rules for an installment sale it states that you cannot use the installment sale method if you sell at a loss.

I have a situation where I'm taking over a return in this situation. The client sold a house for a loss in January 2005. The previous preparer filed the loss on schedule D for 2005 and has been carrying the loss foward. He has been claiming the interest from the amortization on the
schedule b. No 6252 has been filed at all. Not even on the interest from the monthly payments.

Is it alright to continue just filing the interest from the payments on the schedule b with no other explanation or form?

Thanks alot.

[ChEAr$]

Under the general rules for an installment sale it states that you cannot use the installment sale method if you sell at a loss.

I have a situation where I'm taking over a return in this situation. The client sold a house for a loss in January 2005. The previous preparer filed the loss on schedule D for 2005 and has been carrying the loss foward. He has been claiming the interest from the amortization on the
schedule b. No 6252 has been filed at all. Not even on the interest from the monthly payments.

Is it alright to continue just filing the interest from the payments on the schedule b with no other explanation or form?

Thanks alot.

let's see if I have this straight. Loss was duly reported in 2005 and interest has been
reported on schedule b in 2005 and 2006. Is that it?
So is your question "Is a 6252 required to be used every year?"
If so, remember that form is used only in connection with reporting the principal resulting from a sale and has nothing to do with interest.

[quicksam]

Thanks for responding!

If the 6252 is only for reporting the sale and not the interest, then that kinda answers my question. The rule on the form says to not use the form if there is a loss.

So I guess it will be fine to just keep reporting the interest on the Schedule B.

Thank you,

Lester

[Roland Slugg]

No F-6252 at all

No F-6252 should be filed for the transaction at all ... not in the year of sale or in any subsequent years. The interest is reported on Schedule B each year some is received.

But I'm wondering about that loss you say was reported on Schedule D in 2005. You say it was a house that was sold. If it was the T/P's personal residence, or even a second home, the loss was not deductible at all. If it was rental property, the loss was a §1231 loss and was fully deductible in the year of sale, using F-4797. The only "house" I can think of that would give rise to a capital loss would be one purchased as an investment and never rented out or used for personal purposes. I suppose a few investors may do this sort of thing, but it would be relatively rare. You may want to review the facts and, if necessary, recommend the filing of an amended return for 2005.