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Sale of Rental Property

Jerry C
Level 3

Client sold rental property during the year and is holding the Mortgage with the Buyer.

When using the Installment method, The overall Value, Basis is a lost and normally you can't use the Installment method when there is no Profit. How do I present this on the return for 2020 and how do I record the principle payments going forward since there is no

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5 Replies 5
TaxGuyBill
Level 15

If the rental property was sold at a loss, just report the sale of the rental property in the year it was sold.

There is no need to report the payments of Principal.  Just report any interest received.

Jerry C
Level 3

Thank you TaxGuyBill.

 

But if the client is still holding the mortgage going forward, I Know I have to report the Interest, But what happens to the Principle payment. There is no Loan/Payable to offset. So at this point does the client holding the mortgage just pocket the principle and not report?

thanks for your advice 

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sjrcpa
Level 15

If you are making accounting entries there is now a Loan Receivable. Principal payments received reduce this receivable.


ex-AllStar
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Jerry C
Level 3

not making accounting entries.

This question was relating to the preparation of the tax return going forward

 

Thanks for the reply

 

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TaxGuyBill
Level 15

My original answer still applies.