Sell to related party

[bekzm]

Have a rental property that sold for $55,000 to his dad BUT had a note to the son for $10,700 that they are carrying till the dad sells the property and then will pay the $10,700 with interest. No monthly payment but interest accrue daily by February 2008. Still not paid but my question is do I take the $10,700 out of the selling price of $55,000 - add to the selling expense or set up on installment sale? I didn't think you could do installment sale to a relative - how do I handle the sale at $55,000 - 4797 but the loan that the seller is carrying cause they have not received the $10,700.
Man - too much to think about.
Help

[Burke]

I don't think there is any rule that says you cannot make an installment sale to a relative. What it does say is that, if the buyer sells the property within 2 years of the original sale, then the entire gain becomes reportable in the year of the original sale on the original owner's return. In other words, the installment sale treatment is vacated. Hopefully this arrangement was all in the contract. Was it rental property? All unrecaptured 1250 gain is reportable in the year of sale even if the seller did not receive all the purchase price in that year. Otherwise, you do an installment sale form 6252 and report the proceeds actually received allocated properly. The balance due is reported in the year it is received subject to the same profit ratio. Just caution them he has to keep it at least 2 years if you want this treatment to stand.