Q What are installment sales? How do you report them?
A “When property is sold at a gain and at least one payment will be received in the next tax year, the installment sale method is used,” said Bob Davies, a member of the Maryland Society of Accountants.
Under the installment sale method, a part of each payment is allocated to interest, gain, and basis, he said.
“Interest income is reported on Schedule B and gain is reported on Schedule D,” Davies said.
As a whole, an installment sale is reported on Form 6252, Installment Sale Income.
“However, the installment sale method cannot be used if the property was sold at a loss,” Davies said. “It also cannot be used if the property was inventory, securities traded on an established market, or property acquired in a like-kind exchange.”
