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Installment sale

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Level 1

I believe you can set up an installment plan for the Sale of a closely held S-corp.   Client sold their S-corp via installment sale, the note was transferred to each shareholder individually.     The K-1 arrived with  the entire gain from the sale in box 8 of the K-1.  Client is receiving proceeds over the next 5 years.  I was hoping to fill out the form 6252 for this gain.   Does anyone know how to create an installment sale on the individual return using the K-1 information.   Do I need to contact the accountant that did the K-1 for additional information?   

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8 Replies 8
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Level 15

Based on the K-1 presentation you described, the S Corp may have elected out of the installment sale treatment.

I would contact the accountant who prepared the S Corp return.


ex-AllStar
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Level 1

Would the accountant that prepared the K-1 have had to make that specific election, It sounds like the K-1 should have been completed differently to be able to establish the installment sale for my client.  Is that correct?  

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Level 15

Any election would have to be done at the entity level.

Former Chump... umm.... AllStar.
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Level 15

Installment sale treatment is mandatory unless you elect out.

If the S Corp has the sale, the treatment is determined at the S level.


ex-AllStar
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Level 1

Thank you!    If the accountant states he did not make the election, then how do I create the Capital Gains listed in Box 8 of the K-1 into an installment sale.   Do I just list it directly on the Disposition page?  and would I need the 4797 from the S-Corp to determine the Gross profit percentage?    

I don't want my client to get an IRS letter because he is not claiming the entire gain on his personal return.  

Thanks 

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Level 15

You can't. The S Corp has to treat as an installment sale. You pick up the K-1 numbers. 

You should be given the Gross Profit % to use for future years' payments.

Installment sale/gross profit % will be on Form 6252 not 4797.


ex-AllStar
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Level 15

I would ask for a complete copy of the 1120S and state tax returns so you can see what was done/not done. (Client may need  to ask)


ex-AllStar
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Level 1

Thank you so much for your help !!! 

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