Installment Sale and Repossesion

[S T]

I can't get clear in my mind on the mechanics and forms on how I am to report this transaction.

T/P reported an installment sale (form 6252) and schedule D in 2005. Buyer defaulted in 2007, so t/p repossessed the property in 2007, then later in 2007 resold the repossessed property for cash out.

I have an updated existing 6252 (form carryover from 2006) , so I report what on the existing form 6252, the fair market value at the time of repossession or the defaulted note outstanding? Then that will flow through to Schedule D.

Then on the resale of the repossession it is the sale price less my adjusted basis including costs from the repossession, reported on schedule D?

Any guidance would be appreciated.

Sandy

[Grumpy]

If it was real estate

then here is a link to an XL worksheet that might help you. I haven't yet had an occasion to use it myself though:


http://f1.grp.yahoofs.com/v1/UFTmR9TBjTpQjP-UbdGgHGbCVWLFD4ihf0hlo3n61rAatIUDySYI2L90G5F3beMpR KGr2lu3NBRtPtowMjyUwMQTllYNve1J_-JZBQDq/EXCEL%20WKSHEETS-ATTICUS/REPOSESSION%20GAIN.xls[/url]

[Grumpy]

Sorry

Found out that the link doesn't work. Attached is the XL worksheet.

[Grumpy]

Still learning

Found that you cannot upload an xls file. If you want it send an email to Lstew62@hotmail.com and I will send it to you. As I said, I have not used it, but it looks pretty comprehensive.

[S T]

Worksheet

Thanks Grumpy,

I have a worksheet, the numbers are not what I am asking about, it is how to report the forms.

Pub 537 says to report on the same form as the original reporting,

Sandy

[Grumpy]

What type of property is involved?

On what form(s) was the original sale reported? Was it only forms 6252 and Schedule D or was Form 4797 also used (Iknow you didn't mention 4797 in your post)? Was it short or long term gain?

Were any payments received in 2007 from the original installment sale?

I don't think anyone can help without at least this much information.

[S T]

Business

Goodwill on installment sale form 6252 and Schedule D
No payments received in 2007, buyer defaulted
Repossessed in 2007 and subsequently resold at a gain.

Grumpy, thanks for helping

Sandy

[Grumpy]

OK. It's been about 15 years since I did a repo so if I am wrong hopefully some else will jump in and correct.

On the 2007 Form 6252 I would report zero on Line 21 then complete thru Line 26.

The gain-on-repossession that you have calculated I would enter on Line 4 or 11 of Schedule D depending on short or long term gain.

Everything I have read says that the seller's new basis in repossessed property is the fair market value on repossession date, unless the property is real estate. So for the second sale the holding period (generally) will be whatever it was on the first sale and the gain or loss would be calculated using the new basis. Where and how it should be reported depends on the nature of the new sale. If it's a straight cash deal then on the appropriate line of Schedule D.

Now, having said all that, I am left wondering how the goodwill was originally sold without using Form 4797. Is it not a business property???

Anyway, I hope I have helped some.

[S T]

Goodwill

Grumpy you are a life saver. It always helps so much when someone can break it down so you can see the flow from form to form.

The "goodwill" was self created goodwill, not acquired, therefore Schedule D.

Thank you so much!

Sandy