A friend tells me he made an installment sale and has so far paid taxes properly on the revenue he has received; but did not file a form 6252. Are there any consequences to that?
I have heard that it doesn't matter as long as the IRS gets the right payment, but I have also heard that failure to file a 6252 constitutes electing out of an installment sale and taxes are due on the entire sale immediately.
Is one or the other correct?
properly on the revenue he has received; but did not file a form 6252. Are there any consequences to that?
but I have also heard that failure to file a 6252 constitutes electing out of an installment sale and taxes are due on the entire sale immediately.
The default is to report as an installment sale. You must affirmatively elect out of the installment method by reporting the full sale and profit on the return for the period which included the sale.
Failure to include Form 6252 doesn't appear to nullify installment sale treatment. I would assume (but have no hard evidence to support this) that the IRS would be satisfied as long as the taxpayer can document that the correct amount of income was reported and tax was paid each year.
Ira Smilovitz
properly on the revenue he has received; but did not file a form 6252. Are there any consequences to that?
payment, but I have also heard that failure to file a 6252 constitutes electing out of an installment sale and taxes are due on the entire sale immediately.
out of the installment method by reporting the full sale and profit on the return for the period which included the sale.
treatment. I would assume (but have no hard evidence to support this) that the IRS would be satisfied as long as the taxpayer can document that the correct amount of income was reported and tax was paid each year.
Pub 537 says "How to elect out. To make this election, do not report your sale on Form 6252"
That seems to say that not filing a 6252 IS electing out. Or maybe you ALSO have to pay tax on the entire sale?
properly on the revenue he has received; but did not file a form 6252. Are there any consequences to that?
payment, but I have also heard that failure to file a 6252 constitutes electing out of an installment sale and taxes are due on the entire sale immediately.
out of the installment method by reporting the full sale and profit on the return for the period which included the sale.
treatment. I would assume (but have no hard evidence to support this) that the IRS would be satisfied as long as the taxpayer can document that the correct amount of income was reported and tax was paid each year.
sale on Form 6252"
have to pay tax on the entire sale?
Your reference is to the year of sale. It is telling you how you elect out from day one, not how you elect out years later. You can elect out in the first year by declaring the entire gain in the year of sale. Once you have elected the installment method, you can only reverse it with IRS approval as long as the prior payment years are still open.
properly on the revenue he has received; but did not file a form 6252. Are there any consequences to that?
payment, but I have also heard that failure to file a 6252 constitutes electing out of an installment sale and taxes are due on the entire sale immediately.
elect out of the installment method by reporting the full sale and profit on the return for the period which included the sale.
treatment. I would assume (but have no hard evidence to support this) that the IRS would be satisfied as long as the taxpayer can document that the correct amount of income was reported and tax was paid each year.
sale on Form 6252"
have to pay tax on the entire sale?
Yes, I mean in the year of the sale. It seems to say that you elect out by not filing a 6252. My question is if you need to also pay tax on the entire sale in the year of the sale to elect out, or if simply not filing a 6252 is enough.
Under the code, you only need to elect out for the default (installment sale) not to apply. There is no requirement to actually pay the tax.
On the other hand it would be pretty foolish to elect to recognize taxable income that don't actually receive, and then not pay the tax on the income you elected to recognize.
___ Stu
properly on the revenue he has received; but did not file a form 6252. Are there any consequences to that?
payment, but I have also heard that failure to file a 6252 constitutes electing out of an installment sale and taxes are due on the entire sale immediately.
elect out of the installment method by reporting the full sale and profit on the return for the period which included the sale.
treatment. I would assume (but have no hard evidence to support this) that the IRS would be satisfied as long as the taxpayer can document that the correct amount of income was reported and tax was paid each year.
sale on Form 6252"
have to pay tax on the entire sale?
you need to also pay tax on the entire sale in the year of the sale to elect out, or if simply not filing a 6252 is enough.
It doesn't just tell you that you make the election by not filing a form. It tells you you must declare all the gain (even the gain you haven't received and possible won't receive for years) as taxable gross income. Whether you pay your taxes or not is up to you.
You have to pay taxes or else penalties will be due and and criminal charges may be due. You can set up an installment agreement to pay the tax if you don't have the money.
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