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Printable Tax Forms 1040ez

Tax Act 2012 Returning UserPrior TaxTurbo Tax 1040xFree Tax Filing1040 Ez 2010 PdfCan I File 1040nr OnlineHrblock FreeFree E File Federal And State TaxesE File 1040x FreeIncome Tax Forms 1040ez1099xEfile IrsE File 2012 TaxesAmended ReturnFile Free State TaxH&r Block Taxcut OnlineHow To Do Amended Tax ReturnIrs File Taxes Online1040ez Printable Tax FormsPast Year Taxes1040ez Form And InstructionsHow To File Taxes Self EmployedFree Tax Filing For College StudentsIrs E File ExtensionFile Back Taxes OnlineIrs 2010 Tax FormsIrs Form 1040ez 20122013 1040ez Tax FormIncome Tax DeadlineFiling Income Tax For 2012Printable 1040 FormAmended Tax FormTaxcut ComIrs Online 1040ezCan You Still File 2012 TaxesHr Block Tax ReturnsE File A 1040xLowest Price State Tax Filing1040x Form 2013How To Amend 2011 Tax Return Turbotax

Printable Tax Forms 1040ez

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Suspicious e-Mails and Identity Theft

The Internal Revenue Service has issued several recent consumer warnings on the fraudulent use of the IRS name or logo by scamsters trying to gain access to consumers’ financial information in order to steal their identity and assets. When identity theft takes place over the Internet, it is called phishing.

Suspicious e-Mail/Phishing

Phishing (as in “fishing for information” and “hooking” victims) is a scam where Internet fraudsters send e-mail messages to trick unsuspecting victims into revealing personal and financial information that can be used to steal the victims’ identity. Current scams include phony e-mails which claim to come from the IRS and which lure the victims into the scam by telling them that they are due a tax refund.

Phishing and Other Schemes Using the IRS Name

The IRS periodically alerts taxpayers to, and maintains a list of, phishing schemes using the IRS name, logo or Web site clone. If you've received an e-mail, phone call or fax claiming to come from the IRS that seemed a little suspicious, you just may find it on this list.

News Releases

  • IR-2013-84, IRS Warns of Pervasive Telephone Scam
  • IR-2013-17, IRS Intensifies National Crackdown on Identity Theft; Part of Wider Effort to Protect Taxpayers, Prevent Refund Fraud
  • IR-2013-3, National Taxpayer Advocate Delivers Annual Report to Congress; Focuses on Tax Reform, IRS Funding and Identity Theft
  • IR-2012-29, Tax Scam Warning: Beware of Phony Refund Scheme Abusing Popular College Tax Credit; Senior Citizens, Working Families and Church Members Are Targets
  • IR-2012-23, IRS Releases the Dirty Dozen Tax Scams for 2012
  • IR-2011-73, IRS Urges Taxpayers to Avoid Becoming Victims of Tax Scams
  • IR-2009-71, IRS Alerts Public to New Identity Theft Scams
  • IR-2008-11, IRS Warns of New E-Mail and Telephone Scams Using the IRS Name; Advance Payment Scams Starting
  • IR-2007-183, IRS Warns of E-Mail Scam Soliciting Donations to California Wildfire Victims
  • IR-2007-148, IRS Warns of New E-mail Scam Offering Cash for Participation in “Member Satisfaction Survey”
  • IR-2007-109, IRS Warns Taxpayers of New E-mail Scams
  • IR-2007-75, IRS Warns of Phony e-Mails Claiming to Come from the IRS
  • IR-2006-116, Electronic Federal Tax Payment System Cited in New E-mail Scam
  • IR-2006-104, IRS Renews E-mail Alert Following New Scams
  • IR-2006-49, IRS Establishes e-Mail Box for Taxpayers to Report Phony e-Mails

Fact Sheets

  • FS-2014-3, IRS Criminal Investigation Combats Identity Theft Refund Fraud
  • FS-2014-2, Tips for Taxpayers, Victims about Identity Theft and Tax Returns
  • FS-2014-1, IRS Combats Identity Theft and Refund Fraud on Many Fronts
  • FS-2013-4, IRS Criminal Investigation Combats Identity Theft Refund Fraud
  • FS-2013-3, Tips for Taxpayers, Victims about Identity Theft and Tax Returns
  • FS-2013-2, IRS Combats Identity Theft and Refund Fraud on Many Fronts 
  • FS-2012-7, Protect Yourself from Identity Theft
  • FS-2010-9, Online Scams that Impersonate the IRS
  • FS-2009-4, The Official Internal Revenue Service Web Site Is IRS.gov
  • FS-2008-9, Identity Theft E-mail Scams a Growing Problem

Videos

Articles

You Can Help Shut Down Phishing Schemes

The good news is that you can help shut down these schemes and prevent others from being victimized. If you receive a suspicious e-mail that claims to come from the IRS, you can relay that e-mail to a new IRS mailbox, phishing@irs.gov. Follow instructions in the link below for sending the bogus e-mail to ensure that it retains critical elements found in the original e-mail. The IRS can use the information, URLs and links in the suspicious e-mails you send to trace the hosting Web site and alert authorities to help shut down the fraudulent sites. Unfortunately, due to the expected volume, the IRS will not be able to acknowledge receipt or respond to you.

Identity Theft

Identity theft can be committed through e-mail (phishing) or other means, such as regular mail, fax or telephone, or even by going through someone's trash.

Identity theft occurs when someone uses your personal information such as your name, Social Security number or other identifying information without your permission to commit fraud or other crimes. Typically, identity thieves use someone’s personal data to empty the victim’s financial accounts, run up charges on the victim’s existing credit cards, apply for new loans, credit cards, services or benefits in the victim’s name, file fraudulent tax returns or even commit crimes. People whose identities have been stolen can spend months or years — and their hard-earned money — cleaning up the mess thieves have made of their good name and credit record. In the meantime, victims may lose job opportunities, be refused loans, education, housing or cars, or even get arrested for crimes they didn't commit.

Employment Verification Contacts

You may receive a call from an IRS employee requesting verification of income and/or withholding information that has been reported to the IRS through other means. This contact may be made through a telephone call or a faxed request.  

If you receive a telephone call or a fax from someone claiming to be with the IRS and you are not comfortable providing the information, you should contact our customer service line at 1-800-829-4933 to verify the validity of the call or fax. You may then contact the IRS employee who requested the information and provide the required information.

Recent Schemes

The IRS periodically alerts taxpayers to schemes that fraudulently use the IRS name, logo or Web site clone to to gain access to consumers’ financial information in order to steal their identity and assets. The scams may take place through e-mail, fax or phone. The IRS also maintains a list of phishing and other schemes.

For more information on various schemes, see the following:

To Report Fraud

For other than phishing schemes, you may report the fraudulent misuse of the IRS name, logo, forms or other IRS property by calling the TIGTA toll-free hotline at 1-800-366-4484 or visiting the TIGTA Web site.

Other Federal Resources

For more information on understanding and preventing identity theft and suspicious e-mails (phishing), or dealing with their aftermath, check out the following federal resources:

Page Last Reviewed or Updated: 14-Mar-2014

The Printable Tax Forms 1040ez

Printable tax forms 1040ez 10. Printable tax forms 1040ez   Installment Sales Table of Contents Introduction Topics - This chapter discusses: Useful Items - You may want to see: Installment Sale of a Farm Installment MethodWhen to elect out. Printable tax forms 1040ez Revoking the election. Printable tax forms 1040ez More information. Printable tax forms 1040ez Figuring Installment Sale Income Payments Received or Considered Received ExampleSection 1231 gains. Printable tax forms 1040ez Summary. Printable tax forms 1040ez Introduction An installment sale is a sale of property where you receive at least one payment after the tax year of the sale. Printable tax forms 1040ez If you realize a gain on an installment sale, you may be able to report part of your gain when you receive each payment. Printable tax forms 1040ez This method of reporting gain is called the installment method. Printable tax forms 1040ez You cannot use the installment method to report a loss. Printable tax forms 1040ez You can choose to report all of your gain in the year of sale. Printable tax forms 1040ez Installment obligation. Printable tax forms 1040ez   The buyer's obligation to make future payments to you can be in the form of a deed of trust, note, land contract, mortgage, or other evidence of the buyer's debt to you. Printable tax forms 1040ez Topics - This chapter discusses: The general rules that apply to using the installment method Installment sale of a farm Useful Items - You may want to see: Publication 523 Selling Your Home 535 Business Expenses 537 Installment Sales 538 Accounting Periods and Methods 544 Sales and Other Dispositions of Assets Form (and Instructions) 4797 Sales of Business Property 6252 Installment Sale Income See chapter 16 for information about getting publications and forms. Printable tax forms 1040ez Installment Sale of a Farm The installment sale of a farm for one overall price under a single contract is not the sale of a single asset. Printable tax forms 1040ez It generally includes the sale of real property and personal property reportable on the installment method. Printable tax forms 1040ez It may also include the sale of property for which you must maintain an inventory, which cannot be reported on the installment method. Printable tax forms 1040ez See Inventory , later. Printable tax forms 1040ez The selling price must be allocated to determine the amount received for each class of asset. Printable tax forms 1040ez The tax treatment of the gain or loss on the sale of each class of assets is determined by its classification as a capital asset, as property used in the business, or as property held for sale and by the length of time the asset was held. Printable tax forms 1040ez (See chapter 8 for a discussion of capital assets and chapter 9 for a discussion of property used in the business. Printable tax forms 1040ez ) Separate computations must be made to figure the gain or loss for each class of asset sold. Printable tax forms 1040ez See Sale of a Farm in chapter 8. Printable tax forms 1040ez If you report the sale of property on the installment method, any depreciation recapture under section 1245 or 1250 of the Internal Revenue Code is generally taxable as ordinary income in the year of sale. Printable tax forms 1040ez See Depreciation recapture , later. Printable tax forms 1040ez This applies even if no payments are received in that year. Printable tax forms 1040ez Installment Method An installment sale is a sale of property where you receive at least one payment after the tax year of the sale. Printable tax forms 1040ez A farmer who is not required to maintain an inventory can use the installment method to report gain from the sale of property used or produced in farming. Printable tax forms 1040ez See Inventory , later, for information on the sale of farm property where inventory items are included in the assets sold. Printable tax forms 1040ez If a sale qualifies as an installment sale, the gain must be reported under the installment method unless you elect out of using the installment method. Printable tax forms 1040ez Electing out of the installment method. Printable tax forms 1040ez   If you elect not to use the installment method, you generally report the entire gain in the year of sale, even though you do not receive all the sale proceeds in that year. Printable tax forms 1040ez   To make this election, do not report your sale on Form 6252. Printable tax forms 1040ez Instead, report it on Schedule D (Form 1040), Form 4797, or both. Printable tax forms 1040ez When to elect out. Printable tax forms 1040ez   Make this election by the due date, including extensions, for filing your tax return for the year the sale takes place. Printable tax forms 1040ez   However, if you timely file your tax return for the year the sale takes place without making the election, you still can make the election by filing an amended return within 6 months of the due date of the return (excluding extensions). Printable tax forms 1040ez Write “Filed pursuant to section 301. Printable tax forms 1040ez 9100-2” at the top of the amended return and file it where the original return was filed. Printable tax forms 1040ez Revoking the election. Printable tax forms 1040ez   Once made, the election can be revoked only with IRS approval. Printable tax forms 1040ez A revocation is retroactive. Printable tax forms 1040ez More information. Printable tax forms 1040ez   See Electing Out of the Installment Method in Publication 537 for more information. Printable tax forms 1040ez Inventory. Printable tax forms 1040ez   The sale of farm inventory items cannot be reported on the installment method. Printable tax forms 1040ez All gain or loss on their sale must be reported in the year of sale, even if you receive payment in later years. Printable tax forms 1040ez   If inventory items are included in an installment sale, you may have an agreement stating which payments are for inventory and which are for the other assets being sold. Printable tax forms 1040ez If you do not, each payment must be allocated between the inventory and the other assets sold. Printable tax forms 1040ez Sale at a loss. Printable tax forms 1040ez   If your sale results in a loss, you cannot use the installment method. Printable tax forms 1040ez If the loss is on an installment sale of business assets, you can deduct it only in the tax year of sale. Printable tax forms 1040ez Figuring Installment Sale Income Each payment on an installment sale usually consists of the following three parts. Printable tax forms 1040ez Interest income. Printable tax forms 1040ez Return of your adjusted basis in the property. Printable tax forms 1040ez Gain on the sale. Printable tax forms 1040ez In each year you receive a payment, you must include in income both the interest part and the part that is your gain on the sale. Printable tax forms 1040ez You do not include in income the part that is the return of your basis in the property. Printable tax forms 1040ez Basis is the amount of your investment in the property for installment sale purposes. Printable tax forms 1040ez Interest income. Printable tax forms 1040ez   You must report interest as ordinary income. Printable tax forms 1040ez Interest is generally not included in a down payment. Printable tax forms 1040ez However, you may have to treat part of each later payment as interest, even if it is not called interest in your agreement with the buyer. Printable tax forms 1040ez Interest provided in the agreement is called stated interest. Printable tax forms 1040ez If the agreement does not provide for enough stated interest, there may be unstated interest or original issue discount. Printable tax forms 1040ez See Unstated interest , later. Printable tax forms 1040ez    You must continue to report the interest income on payments you receive in subsequent years as interest income. Printable tax forms 1040ez Adjusted basis and installment sale income (gain on sale). Printable tax forms 1040ez   After you have determined how much of each payment to treat as interest, you treat the rest of each payment as if it were made up of two parts. Printable tax forms 1040ez A tax-free return of your adjusted basis in the property, and Your gain (referred to as “installment sale income” on Form 6252). Printable tax forms 1040ez Figuring adjusted basis for installment sale purposes. Printable tax forms 1040ez   You can use Worksheet 10-1 to figure your adjusted basis in the property for installment sale purposes. Printable tax forms 1040ez When you have completed the worksheet, you will also have determined the gross profit percentage necessary to figure your installment sale income (gain) for this year. Printable tax forms 1040ez    Worksheet 10-1. Printable tax forms 1040ez Figuring Adjusted Basis and Gross Profit Percentage 1. Printable tax forms 1040ez Enter the selling price for the property   2. Printable tax forms 1040ez Enter your adjusted basis for the property     3. Printable tax forms 1040ez Enter your selling expenses     4. Printable tax forms 1040ez Enter any depreciation recapture     5. Printable tax forms 1040ez Add lines 2, 3, and 4. Printable tax forms 1040ez  This is your adjusted basis  for installment sale purposes   6. Printable tax forms 1040ez Subtract line 5 from line 1. Printable tax forms 1040ez If zero or less, enter -0-. Printable tax forms 1040ez  This is your gross profit     If the amount entered on line 6 is zero, Stop here. Printable tax forms 1040ez You cannot use the installment method. Printable tax forms 1040ez   7. Printable tax forms 1040ez Enter the contract price for the property   8. Printable tax forms 1040ez Divide line 6 by line 7. Printable tax forms 1040ez This is your gross profit percentage   Selling price. Printable tax forms 1040ez   The selling price is the total cost of the property to the buyer and includes the following. Printable tax forms 1040ez Any money you are to receive. Printable tax forms 1040ez The fair market value (FMV) of any property you are to receive (FMV is discussed at Property used as a payment under Payments Received or Considered Received ). Printable tax forms 1040ez Any existing mortgage or other debt the buyer pays, assumes, or takes (a note, mortgage, or any other liability, such as a lien, accrued interest, or taxes you owe on the property). Printable tax forms 1040ez Any of your selling expenses the buyer pays. Printable tax forms 1040ez Do not include stated interest, unstated interest, any amount recomputed or recharacterized as interest, or original issue discount. Printable tax forms 1040ez Adjusted basis for installment sale purposes. Printable tax forms 1040ez   Your adjusted basis is the total of the following three items. Printable tax forms 1040ez Adjusted basis. Printable tax forms 1040ez Selling expenses. Printable tax forms 1040ez Depreciation recapture. Printable tax forms 1040ez Adjusted basis. Printable tax forms 1040ez   Basis is your investment in the property for installment sale purposes. Printable tax forms 1040ez The way you figure basis depends on how you acquire the property. Printable tax forms 1040ez The basis of property you buy is generally its cost. Printable tax forms 1040ez The basis of property you inherit, receive as a gift, build yourself, or receive in a tax-free exchange is figured differently. Printable tax forms 1040ez   While you own property, various events may change your original basis. Printable tax forms 1040ez Some events, such as adding rooms or making permanent improvements, increase basis. Printable tax forms 1040ez Others, such as deductible casualty losses or depreciation previously allowed or allowable, decrease basis. Printable tax forms 1040ez The result is adjusted basis. Printable tax forms 1040ez See chapter 6 and Publication 551, Basis of Assets, for more information. Printable tax forms 1040ez Selling expenses. Printable tax forms 1040ez   Selling expenses relate to the sale of the property. Printable tax forms 1040ez They include commissions, attorney fees, and any other expenses paid on the sale. Printable tax forms 1040ez Selling expenses are added to the basis of the sold property. Printable tax forms 1040ez Depreciation recapture. Printable tax forms 1040ez   If the property you sold was depreciable property, you may need to recapture part of the gain on the sale as ordinary income. Printable tax forms 1040ez See Depreciation Recapture in chapter 9 and Depreciation Recapture Income in Publication 537. Printable tax forms 1040ez Gross profit. Printable tax forms 1040ez   Gross profit is the total gain you report on the installment method. Printable tax forms 1040ez   To figure your gross profit, subtract your adjusted basis for installment sale purposes from the selling price. Printable tax forms 1040ez If the property you sold was your home, subtract from the gross profit any gain you can exclude. Printable tax forms 1040ez Contract price. Printable tax forms 1040ez   Contract price equals: The selling price, minus The mortgages, debts, and other liabilities assumed or taken by the buyer, plus The amount by which the mortgages, debts, and other liabilities assumed or taken by the buyer exceed your adjusted basis for installment sale purposes. Printable tax forms 1040ez Gross profit percentage. Printable tax forms 1040ez   A certain percentage of each payment (after subtracting interest) is reported as installment sale income. Printable tax forms 1040ez This percentage is called the gross profit percentage and is figured by dividing your gross profit from the sale by the contract price. Printable tax forms 1040ez   The gross profit percentage generally remains the same for each payment you receive. Printable tax forms 1040ez However, see the example under Selling price reduced , later, for a situation where the gross profit percentage changes. Printable tax forms 1040ez Amount to report as installment sale income. Printable tax forms 1040ez   Multiply the payments you receive each year (less interest) by the gross profit percentage. Printable tax forms 1040ez The result is your installment sales income for the tax year. Printable tax forms 1040ez In certain circumstances, you may be treated as having received a payment, even though you received nothing directly. Printable tax forms 1040ez A receipt of property or the assumption of a mortgage on the property sold may be treated as a payment. Printable tax forms 1040ez For a detailed discussion, see Payments Received or Considered Received , later. Printable tax forms 1040ez Selling price reduced. Printable tax forms 1040ez   If the selling price is reduced at a later date, the gross profit on the sale also will change. Printable tax forms 1040ez You then must refigure the gross profit percentage for the remaining payments. Printable tax forms 1040ez Refigure your gross profit using Worksheet 10-2. Printable tax forms 1040ez New Gross Profit Percentage — Selling Price Reduced. Printable tax forms 1040ez You will spread any remaining gain over future installments. Printable tax forms 1040ez    Worksheet 10-2. Printable tax forms 1040ez New Gross Profit Percentage — Selling Price Reduced 1. Printable tax forms 1040ez Enter the reduced selling  price for the property   2. Printable tax forms 1040ez Enter your adjusted  basis for the  property     3. Printable tax forms 1040ez Enter your selling  expenses     4. Printable tax forms 1040ez Enter any depreciation  recapture     5. Printable tax forms 1040ez Add lines 2, 3, and 4. Printable tax forms 1040ez   6. Printable tax forms 1040ez Subtract line 5 from line 1. Printable tax forms 1040ez  This is your adjusted  gross profit   7. Printable tax forms 1040ez Enter any installment sale  income reported in  prior year(s)   8. Printable tax forms 1040ez Subtract line 7 from line 6   9. Printable tax forms 1040ez Future installments     10. Printable tax forms 1040ez Divide line 8 by line 9. Printable tax forms 1040ez  This is your new  gross profit percentage*. Printable tax forms 1040ez   * Apply this percentage to all future payments to determine how much of each of those payments is installment sale income. Printable tax forms 1040ez Example. Printable tax forms 1040ez In 2011, you sold land with a basis of $40,000 for $100,000. Printable tax forms 1040ez Your gross profit was $60,000. Printable tax forms 1040ez You received a $20,000 down payment and the buyer's note for $80,000. Printable tax forms 1040ez The note provides for monthly payments of $1,953 each, figured at 8% interest, amortized over four years, beginning in January 2012. Printable tax forms 1040ez Your gross profit percentage was 60%. Printable tax forms 1040ez You received the down payment of $20,000 in 2011 and total payments of $23,436 in 2012, of which $17,675 was principal and $5,761 was interest according to the amortization schedule. Printable tax forms 1040ez You reported a gain of $12,000 on the down payment received in 2011 and $10,605 ($17,675 X 60% (. Printable tax forms 1040ez 60)) in 2012. Printable tax forms 1040ez In January 2013, you and the buyer agreed to reduce the purchase price to $85,000 and payments during 2013, 2014, and 2015 are reduced to $1,483 a month amortized over the remaining three years. Printable tax forms 1040ez The new gross profit percentage, 47. Printable tax forms 1040ez 32%, is figured in Example — Worksheet 10-2. Printable tax forms 1040ez Example — Worksheet 10-2. Printable tax forms 1040ez New Gross Profit Percentage — Selling Price Reduced 1. Printable tax forms 1040ez Enter the reduced selling  price for the property 85,000 2. Printable tax forms 1040ez Enter your adjusted  basis for the  property 40,000   3. Printable tax forms 1040ez Enter your selling  expenses -0-   4. Printable tax forms 1040ez Enter any depreciation  recapture -0-   5. Printable tax forms 1040ez Add lines 2, 3, and 4. Printable tax forms 1040ez 40,000 6. Printable tax forms 1040ez Subtract line 5 from line 1. Printable tax forms 1040ez  This is your adjusted  gross profit 45,000 7. Printable tax forms 1040ez Enter any installment sale  income reported in  prior year(s) 22,605 8. Printable tax forms 1040ez Subtract line 7 from line 6 22,395 9. Printable tax forms 1040ez Future installments   47,325 10. Printable tax forms 1040ez Divide line 8 by line 9. Printable tax forms 1040ez  This is your new  gross profit percentage*. Printable tax forms 1040ez 47. Printable tax forms 1040ez 32% * Apply this percentage to all future payments to determine how much of each of those payments is installment sale income. Printable tax forms 1040ez You will report installment sale income of $6,878 (47. Printable tax forms 1040ez 32% of $14,535) in 2013, $7,449 (47. Printable tax forms 1040ez 32% of $15,742) in 2014, and $8,067 (47. Printable tax forms 1040ez 32% of $17,048) in 2015. Printable tax forms 1040ez Form 6252. Printable tax forms 1040ez   Use Form 6252 to report an installment sale in the year it takes place and to report payments received, or considered received because of related party resales, in later years. Printable tax forms 1040ez Attach it to your tax return for each year. Printable tax forms 1040ez Disposition of Installment Obligation If you are using the installment method and you dispose of the installment obligation, generally you will have a gain or loss to report. Printable tax forms 1040ez It is considered gain or loss on the sale of the property for which you received the installment obligation. Printable tax forms 1040ez Cancellation. Printable tax forms 1040ez   If an installment obligation is canceled or otherwise becomes unenforceable, it is treated as a disposition other than a sale or exchange. Printable tax forms 1040ez Your gain or loss is the difference between your basis in the obligation and its fair market value (FMV) at the time you cancel it. Printable tax forms 1040ez If the parties are related, the FMV of the obligation is considered to be no less than its full face value. Printable tax forms 1040ez Transfer due to death. Printable tax forms 1040ez   The transfer of an installment obligation (other than to a buyer) as a result of the death of the seller is not a disposition. Printable tax forms 1040ez Any unreported gain from the installment obligation is not treated as gross income to the decedent. Printable tax forms 1040ez No income is reported on the decedent's return due to the transfer. Printable tax forms 1040ez Whoever receives the installment obligation as a result of the seller's death is taxed on the installment payments the same as the seller would have been had the seller lived to receive the payments. Printable tax forms 1040ez   However, if the installment obligation is canceled, becomes unenforceable, or is transferred to the buyer because of the death of the holder of the obligation, it is a disposition. Printable tax forms 1040ez The estate must figure its gain or loss on the disposition. Printable tax forms 1040ez If the holder and the buyer were related, the FMV of the installment obligation is considered to be no less than its full face value. Printable tax forms 1040ez More information. Printable tax forms 1040ez   For more information on the disposition of an installment obligation, see Publication 537. Printable tax forms 1040ez Sale of depreciable property. Printable tax forms 1040ez   You generally cannot report gain from the sale of depreciable property to a related person on the installment method. Printable tax forms 1040ez See Sale to a Related Person in Publication 537. Printable tax forms 1040ez   You cannot use the installment method to report any depreciation recapture income up to the gain on the sale. Printable tax forms 1040ez However, report any gain greater than the recapture income on the installment method. Printable tax forms 1040ez   The recapture income reported in the year of sale is included in your installment sale basis to determine your gross profit on the installment sale. Printable tax forms 1040ez   Figure your depreciation recapture income (including the section 179 deduction and the section 179A deduction recapture) in Part III of Form 4797. Printable tax forms 1040ez Report the depreciation recapture income in Part II of Form 4797 as ordinary income in the year of sale. Printable tax forms 1040ez    If you sell depreciable business property, prepare Form 4797 first in order to figure the amount to enter on line 12 of Part I, Form 6252. Printable tax forms 1040ez See the Form 6252 instructions for details. Printable tax forms 1040ez   For more information on the section 179 deduction, see Section 179 Expense Deduction in chapter 7. Printable tax forms 1040ez For more information on depreciation recapture, see Depreciation Recapture in  chapter 9. Printable tax forms 1040ez Payments Received or Considered Received You must figure your gain each year on the payments you receive, or are treated as receiving, from an installment sale. Printable tax forms 1040ez In certain situations, you are considered to have received a payment, even though the buyer does not pay you directly. Printable tax forms 1040ez These situations occur when the buyer assumes or pays any of your debts, such as a loan, or pays any of your expenses, such as a sales commission. Printable tax forms 1040ez However, as discussed later, the buyer's assumption of your debt is treated as a recovery of basis, rather than as a payment, in many cases. Printable tax forms 1040ez Buyer pays seller's expenses. Printable tax forms 1040ez   If the buyer pays any of your expenses related to the sale of your property, it is considered a payment to you in the year of sale. Printable tax forms 1040ez Include these expenses in the selling and contract prices when figuring the gross profit percentage. Printable tax forms 1040ez Buyer assumes mortgage. Printable tax forms 1040ez   If the buyer assumes or pays off your mortgage, or otherwise takes the property subject to the mortgage, the following rules apply. Printable tax forms 1040ez Mortgage less than basis. Printable tax forms 1040ez   If the buyer assumes a mortgage that is not more than your installment sale basis in the property, it is not considered a payment to you. Printable tax forms 1040ez It is considered a recovery of your basis. Printable tax forms 1040ez The contract price is the selling price minus the mortgage. Printable tax forms 1040ez Example. Printable tax forms 1040ez You sell property with an adjusted basis of $19,000. Printable tax forms 1040ez You have selling expenses of $1,000. Printable tax forms 1040ez The buyer assumes your existing mortgage of $15,000 and agrees to pay you $10,000 (a cash down payment of $2,000 and $2,000 (plus 8% interest) in each of the next 4 years). Printable tax forms 1040ez The selling price is $25,000 ($15,000 + $10,000). Printable tax forms 1040ez Your gross profit is $5,000 ($25,000 − $20,000 installment sale basis). Printable tax forms 1040ez The contract price is $10,000 ($25,000 − $15,000 mortgage). Printable tax forms 1040ez Your gross profit percentage is 50% ($5,000 ÷ $10,000). Printable tax forms 1040ez You report half of each $2,000 payment received as gain from the sale. Printable tax forms 1040ez You also report all interest you receive as ordinary income. Printable tax forms 1040ez Mortgage more than basis. Printable tax forms 1040ez   If the buyer assumes a mortgage that is more than your installment sale basis in the property, you recover your entire basis. Printable tax forms 1040ez The part of the mortgage greater than your basis is treated as a payment received in the year of sale. Printable tax forms 1040ez   To figure the contract price, subtract the mortgage from the selling price. Printable tax forms 1040ez This is the total amount (other than interest) you will receive directly from the buyer. Printable tax forms 1040ez Add to this amount the payment you are considered to have received (the difference between the mortgage and your installment sale basis). Printable tax forms 1040ez The contract price is then the same as your gross profit from the sale. Printable tax forms 1040ez    If the mortgage the buyer assumes is equal to or more than your installment sale basis, the gross profit percentage always will be 100%. Printable tax forms 1040ez Example. Printable tax forms 1040ez The selling price for your property is $9,000. Printable tax forms 1040ez The buyer will pay you $1,000 annually (plus 8% interest) over the next 3 years and assume an existing mortgage of $6,000. Printable tax forms 1040ez Your adjusted basis in the property is $4,400. Printable tax forms 1040ez You have selling expenses of $600, for a total installment sale basis of $5,000. Printable tax forms 1040ez The part of the mortgage that is more than your installment sale basis is $1,000 ($6,000 − $5,000). Printable tax forms 1040ez This amount is included in the contract price and treated as a payment received in the year of sale. Printable tax forms 1040ez The contract price is $4,000: Selling price $9,000 Minus: Mortgage (6,000) Amount actually received $3,000 Add difference:   Mortgage $6,000   Minus: Installment sale basis 5,000 1,000 Contract price $4,000   Your gross profit on the sale is also $4,000: Selling price $9,000 Minus: Installment sale basis (5,000) Gross profit $4,000   Your gross profit percentage is 100%. Printable tax forms 1040ez Report 100% of each payment (less interest) as gain from the sale. Printable tax forms 1040ez Treat the $1,000 difference between the mortgage and your installment sale basis as a payment and report 100% of it as gain in the year of sale. Printable tax forms 1040ez Buyer assumes other debts. Printable tax forms 1040ez   If the buyer assumes any other debts, such as a loan or back taxes, it may be considered a payment to you in the year of sale. Printable tax forms 1040ez   If the buyer assumes the debt instead of paying it off, only part of it may have to be treated as a payment. Printable tax forms 1040ez Compare the debt to your installment sale basis in the property being sold. Printable tax forms 1040ez If the debt is less than your installment sale basis, none of it is treated as a payment. Printable tax forms 1040ez If it is more, only the difference is treated as a payment. Printable tax forms 1040ez If the buyer assumes more than one debt, any part of the total that is more than your installment sale basis is considered a payment. Printable tax forms 1040ez These rules are the same as the rules discussed earlier under Buyer assumes mortgage . Printable tax forms 1040ez However, they apply only to the following types of debt the buyer assumes. Printable tax forms 1040ez Those acquired from ownership of the property you are selling, such as a mortgage, lien, overdue interest, or back taxes. Printable tax forms 1040ez Those acquired in the ordinary course of your business, such as a balance due for inventory you purchased. Printable tax forms 1040ez   If the buyer assumes any other type of debt, such as a personal loan or your legal fees relating to the sale, it is treated as if the buyer had paid off the debt at the time of the sale. Printable tax forms 1040ez The value of the assumed debt is then considered a payment to you in the year of sale. Printable tax forms 1040ez Property used as a payment. Printable tax forms 1040ez   If you receive property rather than money from the buyer, it is still considered a payment in the year received. Printable tax forms 1040ez However, see Trading property for like-kind property , later. Printable tax forms 1040ez Generally, the amount of the payment is the property's FMV on the date you receive it. Printable tax forms 1040ez Exception. Printable tax forms 1040ez   If the property the buyer gives you is payable on demand or readily tradable (see examples later), the amount you should consider as payment in the year received is: The FMV of the property on the date you receive it if you use the cash method of accounting, The face amount of the obligation on the date you receive it if you use an accrual method of accounting, or The stated redemption price at maturity less any original issue discount (OID) or, if there is no OID, the stated redemption price at maturity appropriately discounted to reflect total unstated interest. Printable tax forms 1040ez See Unstated interest , later. Printable tax forms 1040ez Examples. Printable tax forms 1040ez If you receive a note from the buyer as payment, and the note stipulates that you can demand payment from the buyer at any time, the note is payable on demand. Printable tax forms 1040ez If you receive marketable securities from the buyer as payment, and you can sell the securities on an established securities market (such as the New York Stock Exchange) at any time, the securities are readily tradable. Printable tax forms 1040ez In these examples, use the above rules to determine the amount you should consider as payment in the year received. Printable tax forms 1040ez Debt not payable on demand. Printable tax forms 1040ez   Any evidence of debt you receive from the buyer that is not payable on demand is not considered a payment. Printable tax forms 1040ez This is true even if the debt is guaranteed by a third party, including a government agency. Printable tax forms 1040ez Fair market value (FMV). Printable tax forms 1040ez   This is the price at which property would change hands between a willing buyer and a willing seller, neither being under any compulsion to buy or sell and both having a reasonable knowledge of all the necessary facts. Printable tax forms 1040ez Third-party note. Printable tax forms 1040ez   If the property the buyer gives you is a third-party note (or other obligation of a third party), you are considered to have received a payment equal to the note's FMV. Printable tax forms 1040ez Because the FMV of the note is itself a payment on your installment sale, any payments you later receive from the third party are not considered payments on the sale. Printable tax forms 1040ez The excess of the note's face value over its FMV is interest. Printable tax forms 1040ez Exclude this interest in determining the selling price of the property. Printable tax forms 1040ez However, see Exception under Property used as a payment , earlier. Printable tax forms 1040ez Example. Printable tax forms 1040ez You sold real estate in an installment sale. Printable tax forms 1040ez As part of the down payment, the buyer assigned to you a $50,000, 8% third-party note. Printable tax forms 1040ez The FMV of the third-party note at the time of the sale was $30,000. Printable tax forms 1040ez This amount, not $50,000, is a payment to you in the year of sale. Printable tax forms 1040ez The third-party note had an FMV equal to 60% of its face value ($30,000 ÷ $50,000), so 60% of each principal payment you receive on this note is a nontaxable return of capital. Printable tax forms 1040ez The remaining 40% is interest taxed as ordinary income. Printable tax forms 1040ez Bond. Printable tax forms 1040ez   A bond or other evidence of debt you receive from the buyer that is payable on demand or readily tradable in an established securities market is treated as a payment in the year you receive it. Printable tax forms 1040ez For more information on the amount you should treat as a payment, see Exception under Property used as a payment , earlier. Printable tax forms 1040ez   If you receive a government or corporate bond for a sale before October 22, 2004, and the bond has interest coupons attached or can be readily traded in an established securities market, you are considered to have received payment equal to the bond's FMV. Printable tax forms 1040ez However, see Exception under Property used as a payment , earlier. Printable tax forms 1040ez Buyer's note. Printable tax forms 1040ez   The buyer's note (unless payable on demand) is not considered payment on the sale. Printable tax forms 1040ez However, its full face value is included when figuring the selling price and the contract price. Printable tax forms 1040ez Payments you receive on the note are used to figure your gain in the year received. Printable tax forms 1040ez Sale to a related person. Printable tax forms 1040ez   If you sell depreciable property to a related person and the sale is an installment sale, you may not be able to report the sale using the installment method. Printable tax forms 1040ez For information on these rules, see the Instructions for Form 6252 and Sale to a Related Person in Publication 537. Printable tax forms 1040ez Trading property for like-kind property. Printable tax forms 1040ez   If you trade business or investment property solely for the same kind of property to be held as business or investment property, you can postpone reporting the gain. Printable tax forms 1040ez See Like-Kind Exchanges in chapter 8 for a discussion of like-kind property. Printable tax forms 1040ez   If, in addition to like-kind property, you receive an installment obligation in the exchange, the following rules apply to determine installment sale income each year. Printable tax forms 1040ez The contract price is reduced by the FMV of the like-kind property received in the trade. Printable tax forms 1040ez The gross profit is reduced by any gain on the trade that can be postponed. Printable tax forms 1040ez Like-kind property received in the trade is not considered payment on the installment obligation. Printable tax forms 1040ez Unstated interest. Printable tax forms 1040ez   An installment sale contract may provide that each deferred payment on the sale will include interest or that there will be an interest payment in addition to the principal payment. Printable tax forms 1040ez Interest provided in the contract is called stated interest. Printable tax forms 1040ez   If an installment sale contract does not provide for adequate stated interest, part of the stated principal amount of the contract may be recharacterized as interest. Printable tax forms 1040ez If Internal Revenue Code section 483 applies to the contract, this interest is called unstated interest. Printable tax forms 1040ez   If Internal Revenue Code section 1274 applies to the contract, this interest is called original issue discount (OID). Printable tax forms 1040ez   Generally, if a buyer gives a debt in consideration for personal use property, the unstated interest rules do not apply. Printable tax forms 1040ez Therefore, the buyer cannot deduct the unstated interest. Printable tax forms 1040ez The seller must report the unstated interest as income. Printable tax forms 1040ez Personal-use property is any property in which substantially all of its use by the buyer is not in connection with a trade or business or an investment activity. Printable tax forms 1040ez   If the debt is subject to the Internal Revenue Code section 483 rules and is also subject to the below-market loan rules, such as a gift loan, compensation-related loan or corporation-shareholder loan, then both parties are subject to the below-market loan rules rather than the unstated interest rules. Printable tax forms 1040ez   Unstated interest reduces the stated selling price of the property and the buyer's basis in the property. Printable tax forms 1040ez It increases the seller's interest income and the buyer's interest expense. Printable tax forms 1040ez   In general, an installment sale contract provides for adequate stated interest if the stated interest rate (based on an appropriate compounding period) is at least equal to the applicable federal rate (AFR). Printable tax forms 1040ez    The AFRs are published monthly in the Internal Revenue Bulletin (IRB). Printable tax forms 1040ez You can get this information by contacting an IRS office. Printable tax forms 1040ez IRBs are also available at IRS. Printable tax forms 1040ez gov. Printable tax forms 1040ez More information. Printable tax forms 1040ez   For more information, see Unstated Interest and Original Issue Discount (OID) in Publication 537. Printable tax forms 1040ez Example. Printable tax forms 1040ez You sell property at a contract price of $6,000 and your gross profit is $1,500. Printable tax forms 1040ez Your gross profit percentage is 25% ($1,500 ÷ $6,000). Printable tax forms 1040ez After subtracting interest, you report 25% of each payment, including the down payment, as installment sale income from the sale for the tax year you receive the payment. Printable tax forms 1040ez The remainder (balance) of each payment is the tax-free return of your adjusted basis. Printable tax forms 1040ez Example On January 3, 2013, you sold your farm, including the home, farm land and buildings. Printable tax forms 1040ez You received $50,000 down and the buyer's note for $200,000. Printable tax forms 1040ez In addition, the buyer assumed an outstanding $50,000 mortgage on the farm land. Printable tax forms 1040ez The total selling price was $300,000. Printable tax forms 1040ez The note payments of $25,000 each, plus adequate interest, are due every July 1 and January 1, beginning in July 2013. Printable tax forms 1040ez Your selling expenses were $15,000. Printable tax forms 1040ez Adjusted basis and depreciation. Printable tax forms 1040ez   The adjusted basis and depreciation claimed on each asset sold are as follows:   Depreciation Adjusted Asset Claimed Basis Home* -0- $33,743 Farm land -0- 73,610 Buildings $31,500 35,130 * Owned and used as main home for at least 2 of the 5 years prior to the sale Gain on each asset. Printable tax forms 1040ez   The following schedule shows the assets included in the sale, each asset's selling price based on its respective value, the selling expense allocated to each asset, the adjusted basis of each asset, and the gain on each asset. Printable tax forms 1040ez The selling expense for each asset is 5% of the selling price ($15,000 selling expense ÷ $300,000 selling price). Printable tax forms 1040ez   Selling Selling Adjusted     Price Expense Basis Gain Home* $60,000 $3,000 $33,743 $23,257 Farm land  165,000  8,250  73,610  83,140 Buildings 75,000 3,750 35,130 36,120   $300,000 $15,000 $142,483 $142,517 * Owned and used as main home for at least 2 of the 5 years prior to the sale Depreciation recapture. Printable tax forms 1040ez   The buildings are section 1250 property. Printable tax forms 1040ez There is no depreciation recapture income for them because they were depreciated using the straight line method. Printable tax forms 1040ez See chapter 9 for more information on depreciation recapture. Printable tax forms 1040ez   Special rules may apply when you sell section 1250 assets depreciated under the straight line method. Printable tax forms 1040ez See the Unrecaptured Section 1250 Gain Worksheet in the Instructions for Schedule D (Form 1040). Printable tax forms 1040ez See chapter 3 of Publication 544, Sales and Other Dispositions of Assets, for more information on section 1250 assets. Printable tax forms 1040ez Installment sale basis and gross profit. Printable tax forms 1040ez   The following table shows each asset reported on the installment method, its selling price, installment sale basis, and gross profit. Printable tax forms 1040ez     Installment     Selling Sale Gross   Price Basis Profit Farm land $165,000 $73,610 $83,140 Buildings 75,000 35,130 36,120   $240,000 $108,740 $119,260 Section 1231 gains. Printable tax forms 1040ez   The gain on the farm land and buildings is reported as section 1231 gains. Printable tax forms 1040ez See Section 1231 Gains and Losses in chapter 9. Printable tax forms 1040ez Contract price and gross profit percentage. Printable tax forms 1040ez   The contract price is $250,000 for the part of the sale reported on the installment method. Printable tax forms 1040ez This is the selling price ($300,000) minus the mortgage assumed ($50,000). Printable tax forms 1040ez   Gross profit percentage for the sale is 47. Printable tax forms 1040ez 70% ($119,260 gross profit ÷ $250,000 contract price). Printable tax forms 1040ez The gross profit percentage for each asset is figured as follows:   Percent Farm land ($83,140 ÷ $250,000) 33. Printable tax forms 1040ez 256 Buildings ($36,120 ÷ $250,000) 14. Printable tax forms 1040ez 448 Total 47. Printable tax forms 1040ez 70 Figuring the gain to report on the installment method. Printable tax forms 1040ez   One hundred percent (100%) of each payment is reported on the installment method. Printable tax forms 1040ez The total amount received on the sale in 2013 is $75,000 ($50,000 down payment + $25,000 payment on July 1). Printable tax forms 1040ez The installment sale part of the total payments received in 2013 is also $75,000. Printable tax forms 1040ez Figure the gain to report for each asset by multiplying its gross profit percentage times $75,000. Printable tax forms 1040ez   Income Farm land—33. Printable tax forms 1040ez 256% × $75,000 $24,942 Buildings—14. Printable tax forms 1040ez 448% × $75,000 10,836 Total installment income for 2013 $35,778 Reporting the sale. Printable tax forms 1040ez   Report the installment sale on Form 6252. Printable tax forms 1040ez Then report the amounts from Form 6252 on Form 4797 and Schedule D (Form 1040). Printable tax forms 1040ez Attach a separate page to Form 6252 that shows the computations in the example. Printable tax forms 1040ez If you sell depreciable business property, prepare Form 4797 first in order to figure the amount to enter on line 12 of Part I, Form 6252. Printable tax forms 1040ez Section 1231 gains. Printable tax forms 1040ez   The gains on the farm land and buildings are section 1231 gains. Printable tax forms 1040ez They may be reported as either capital or ordinary gain depending on the net balance when combined with other section 1231 losses. Printable tax forms 1040ez A net 1231 gain is capital gain and a net 1231 loss is an ordinary loss. Printable tax forms 1040ez Installment income for years after 2013. Printable tax forms 1040ez   You figure installment income for the years after 2013 by applying the same gross profit percentages to the payments you receive each year. Printable tax forms 1040ez If you receive $50,000 during the year, the entire $50,000 is considered received on the installment sale (100% × $50,000). Printable tax forms 1040ez You realize income as follows:   Income Farm land—33. Printable tax forms 1040ez 256% × $50,000 $16,628 Buildings—14. Printable tax forms 1040ez 448% × $50,000 7,224 Total installment income $23,852   In this example, no gain ever is recognized from the sale of your home. Printable tax forms 1040ez You will combine your section 1231 gains from this sale with section 1231 gains and losses from other sales in each of the later years to determine whether to report them as ordinary or capital gains. Printable tax forms 1040ez The interest received with each payment will be included in full as ordinary income. Printable tax forms 1040ez Summary. Printable tax forms 1040ez   The installment income (rounded to the nearest dollar) from the sale of the farm is reported as follows: Selling price $190,000 Minus: Installment basis (108,740) Gross profit $81,260     Gain reported in 2012 (year of sale) $35,778 Gain reported in 2013:   $50,000 × 47. Printable tax forms 1040ez 70% 23,850 Gain reported in 2014:   $50,000 × 47. Printable tax forms 1040ez 70% 23,850 Gain reported in 2015:   $50,000 × 47. Printable tax forms 1040ez 70% 23,850 Gain reported in 2016:   $25,000 × 47. Printable tax forms 1040ez 70% 11,925 Total gain reported $119,253 Prev  Up  Next   Home   More Online Publications