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Department of the Treasury sale using the installment method. For this
purpose, depreciable property is any
Internal Revenue Service property that can be depreciated by the
person or entity to whom you transfer it.
Instructions for Form 6252 However, you may use the installment
method if you can show to the satisfaction
of the IRS that avoidance of Federal
Installment Sale Income income taxes was not one of the principal
purposes of the sale (e.g., no significant
Section references are to the Inter nal Revenue Code unless otherwise noted. tax deferral benefits will result from the
sale).
If the installment method does not apply,
Paperwork Reduction Which Parts To Complete report the sale on Schedule D or Form
Act Notice For the year of sale.—Complete lines 1
through 26.
4797, whichever applies. Treat all
payments you will receive as if they were
We ask for the information on this form to received in the year of sale. Use FMV for
For years after the year of sale.—
carry out the Internal Revenue laws of the any payment that is contingent as to
Complete lines 1 through 4, and Part II, for
United States. You are required to give us amount. If the FMV cannot be readily
any year you receive a payment from an
the information. We need it to ensure that determined, basis is recovered ratably.
installment sale.
you are complying with these laws and to Pledge rule.—If an installment obligation
allow us to figure and collect the right Related party sales.—If you sold
marketable securities to a related party from a nondealer disposition of real
amount of tax. property used in a trade or business or
(defined below), complete Form 6252 for
The time needed to complete and file held for the production of rental income
each year of the installment agreement,
this form will vary depending on individual with a sales price over $150,000 is
even if you did not receive a payment. For
circumstances. The estimated average time pledged as security on debt after
any year after the year of sale, complete
is: December 17, 1987, treat the net proceeds
lines 1 through 4, and Part III. If you
Recordkeeping 1 hr., 25 min. received a payment, also complete Part II. of the secured debt as a payment on the
installment obligation. This rule applies to
Learning about the If you sold property other than the disposition of any property under the
law or the form 39 min. marketable securities to a related party, installment method after 1988 with a sales
Preparing the form 56 min. complete Form 6252 for the year of sale price over $150,000, except for farm
Copying, assembling, and and for 2 years after the year of sale even property and personal use property
sending the form to the IRS 20 min. if you did not receive a payment. If during disposed of by an individual. The amount
this 2-year period you did not receive an treated as a payment cannot exceed the
If you have comments concerning the actual or deemed payment, complete lines
accuracy of these time estimates or excess of the total contract price over any
1 through 4, and Part III. After this 2-year payments received under the contract
suggestions for making this form simpler, period, see For years after the year of
we would be happy to hear from you. See before the secured debt was obtained.
sale above.
the instructions for the tax return with The pledge rule does not apply to
which this form is filed. Special Rules pledges made after December 17, 1987, if
the debt is incurred to refinance the
Interest.—If any part of an installment principal amount of a debt that was
General Instructions payment you received is for interest, report outstanding on December 17, 1987, AND
that interest on the appropriate form or was secured by nondealer real property
Purpose of Form schedule. Do not report interest received, installment obligations on that date and at
Use Form 6252 to report income from carrying charges received, or unstated all times after that date until the
casual sales of real or personal property interest on Form 6252. Get Pub. 537, refinancing occurred. However, this
(other than inventory) if you will receive any Installment Sales, for details on unstated exception does not apply to the extent that
payments in a tax year after the year of interest. the principal amount of the debt resulting
sale. Installment sales to related party.—A from the refinancing exceeds the principal
special rule applies to a first disposition amount of the refinanced debt immediately
Do not use Form 6252 to report sales
(sale or exchange) of property under the before the refinancing. Also, the pledge
after 1986 of stock or securities traded on
installment method to a related party who rule does not affect refinancing due to the
an established securities market. Treat all
then makes a second disposition (sale, calling of a debt by the creditor as long as
payments from these sales as received in
exchange, gift, or cancellation of the debt is then refinanced by a person
the year you sold the stock.
installment note) before making all other than this creditor or someone related
Do not use Form 6252 if you elect not to payments on the first disposition. For this to the creditor.
report the sale on the installment method. purpose, a related party includes your Interest on deferred tax.—Generally,
To elect out, report the full amount of the spouse, child, grandchild, parent, brother, interest must be paid on the deferred tax
gain on a timely filed return (including sister, or a related corporation, related to any obligation that arises during
extensions), using Form 4797, Sales of S corporation, partnership, estate, or trust. a tax year from the disposition of property
Business Property, or the Schedule D for See section 453(f)(1) for more details. under the installment method if:
your return, whichever applies.
Under this rule, treat part or all of the ● The property had a sales price over
Note: Generally, once you file Form 6252, amount the related party realized (or the $150,000, AND
you cannot later elect out of the installment fair market value (FMV) if the disposed
method. However, if your original return property is not sold or exchanged) from ● The aggregate balance of all nondealer
was filed on time, you may make the the second disposition as if you received it installment obligations arising during, and
election on an amended return filed no from the first disposition at the time of the outstanding at the close of, the tax year is
later than 6 months after the due date of second disposition. Figure the gain, if any, more than $5 million.
your return, excluding extensions. See Rev. on lines 30 through 37. This rule does not Interest must be paid in subsequent
Proc. 92-85, 1992-2 C.B. 490, for more apply if any of the conditions listed on line years if installment obligations, which
details. 29 are met. originally required interest to be paid, are
Sale of depreciable property to related still outstanding at the close of a tax year.
person.—Generally, if you sell depreciable
property to a related person (as defined in