97 Department of the Treasury

Internal Revenue Service

Instructions for Form 6252

Installment Sale Income

Section references are to the Internal Revenue Code unless otherwise noted.

General Instructions

Purpose of Form

Use Form 6252 to report income from casual

sales of real or personal property (other than

inventory) if you will receive any payments in

a tax year after the year of sale.

Do not use Form 6252 to report sales after

1986 of stock or securities traded on an

established securities market. Treat all

payments from these sales as received in the

year you sold the stock.

Do not use Form 6252 if you elect not to

report the sale on the installment method. To

elect out, report the full amount of the gain on

a timely filed return (including extensions),

using Form 4797, Sales of Business Property,

or the Schedule D for your return, whichever

applies.

Note: Generally, once you file Form 6252, you

cannot later elect out of the installment method.

However, if your original return was filed on

time, you may make the election on an

amended return filed no later than 6 months

after the due date of your return, excluding

extensions. See Temporary Regulations

section 301.9100-2T for more details.

Which Parts To Complete

For the year of sale. Complete lines 1

through 26.

For years after the year of sale. Complete

lines 1 through 4, and Part II, for any year you

receive a payment from an installment sale.

Related party sales. If you sold marketable

securities to a related party (defined below),

complete Form 6252 for each year of the

installment agreement, even if you did not

receive a payment. For any year after the year

of sale, complete lines 1 through 4, and Part III.

If you received a payment, also complete Part

II.

If you sold property other than marketable

securities to a related party, complete Form

6252 for the year of sale and for 2 years after

the year of sale even if you did not receive a

payment. If during this 2-year period you did

not receive an actual or deemed payment,

complete lines 1 through 4, and Part III. After

this 2-year period, see For years after the

year of sale above.

Special Rules

Interest. If any part of an installment payment

you received is for interest, report that interest

on the appropriate form or schedule. Do not

report interest received, carrying charges

received, or unstated interest on Form 6252.

Get Pub. 537, Installment Sales, for details on

unstated interest.

Installment sales to related party. A special

rule applies to a first disposition (sale or

exchange) of property under the installment

method to a related party who then makes a

second disposition (sale, exchange, gift, or

cancellation of installment note) before making

all payments on the first disposition. For this

purpose, a related party includes your spouse,

child, grandchild, parent, brother, sister, or a

related corporation, S corporation, partnership,

estate, or trust. See section 453(f)(1) for more

details.

Under this rule, treat part or all of the amount

the related party realized (or the fair market

value (FMV) if the disposed property is not sold

or exchanged) from the second disposition as

if you received it from the first disposition at the

time of the second disposition. Figure the gain,

if any, on lines 30 through 37. This rule does

not apply if any of the conditions listed on line

29 are met.

Sale of depreciable property to related

person. Generally, if you sell depreciable

property to a related person (as defined in

section 453(g)(3)), you may not report the sale

using the installment method. For this purpose,

depreciable property is any property that can

be depreciated by the person or entity to whom

you transfer it.

However, you may use the installment

method if you can show to the satisfaction of

the IRS that avoidance of Federal income taxes

was not one of the principal purposes of the

sale (e.g., no significant tax deferral benefits

will result from the sale).

If the installment method does not apply,

report the sale on Schedule D or Form 4797,

whichever applies. Treat all payments you will

receive as if they were received in the year of

sale. Use FMV for any payment that is

contingent as to amount. If the FMV cannot be

readily determined, basis is recovered ratably.

Pledge rule. If an installment obligation from

a nondealer disposition of real property used in

a trade or business or held for the production

of rental income with a sales price over

$150,000 is pledged as security on debt after

December 17, 1987, treat the net proceeds of

the secured debt as a payment on the

installment obligation. This rule applies to the

disposition of any property under the

installment method after 1988 with a sales

price over $150,000, except for farm property

and personal use property disposed of by an

individual. The amount treated as a payment

cannot exceed the excess of the total contract

price over any payments received under the

contract before the secured debt was obtained.

The pledge rule does not apply to pledges

made after December 17, 1987, if the debt is

incurred to refinance the principal amount of a

debt that was outstanding on December 17,

1987, AND was secured by nondealer real

property installment obligations on that date

and at all times after that date until the

refinancing occurred. However, this exception

does not apply to the extent that the principal

amount of the debt resulting from the

refinancing exceeds the principal amount of the

refinanced debt immediately before the

refinancing. Also, the pledge rule does not

affect refinancing due to the calling of a debt

by the creditor as long as the debt is then

refinanced by a person other than this creditor

or someone related to the creditor.

Interest on deferred tax. Generally, interest

must be paid on the deferred tax related to any

obligation that arises during a tax year from the

disposition of property under the installment

method if:

●A The property had a sales price over

$150,000, AND

●A The aggregate balance of all nondealer

installment obligations arising during, and

outstanding at the close of, the tax year is more

than $5 million.

Interest must be paid in subsequent years if

installment obligations, which originally

required interest to be paid, are still outstanding

at the close of a tax year.

These rules do not apply to dispositions of:

●A Farm property,

●A Personal use property by an individual,

●A Real property in tax years beginning before

1988, or

●A Personal property before 1989.

How to report the interest. The interest is

not figured on Form 6252. See section 453A to

figure the interest. Enter the interest as an

additional tax on your tax return. Include it in

the amount to be entered on the total tax line

after credits and other taxes. For individuals,

this is line 53 of the 1997 Form 1040. For

corporations, it is line 10 of Schedule J (Form

1120). Write “Section 453A(c) interest” to the

left of the amount.

Corporations may deduct the interest in the

year it is paid or accrued. For individuals and

other taxpayers, this interest is not deductible.

Additional Information

See Pub. 537 for additional information,

including details about reductions in selling

price, the single sale of several assets,

like-kind exchanges, dispositions of installment

obligations, and repossessions.

Specific Instructions

Part I—Gross Profit and

Contract Price

Line 5. Enter the total of any money, face

amount of the installment obligation, and the

FMV of other property that you received or will

receive in exchange for the property sold.

Include on line 5 any existing mortgage or other

debt the buyer assumed or took the property

subject to.

Cat. No. 64262Q
If there is no stated maximum selling price,

such as in a contingent sale, attach a schedule

showing the computation of gain. Enter the

taxable part on line 24 and also on line 35 if

Part III applies. See Temporary Regulations

section 15A.453.

Line 6. Enter only mortgages or other debts

the buyer assumed from the seller or took the

property subject to. Do not include new

mortgages the buyer gets from a bank, the

seller, or other sources.

Line 8. Enter the original cost and other

expenses you incurred in buying the property.

Add the cost of improvements, etc., and

subtract any qualified electric vehicle credit,

diesel-powered highway vehicle credit,

enhanced oil recovery credit, disabled access

credit, or casualty losses previously allowed.

For more details, get Pub. 551, Basis of

Assets.

Line 9. Enter all depreciation or amortization

you deducted or should have deducted from

the date of purchase until the date of sale. Add

any section 179 expense deduction; the

downward basis adjustment under section

50(c) (or the corresponding provision of prior

law); the deduction for qualified clean-fuel

vehicle property or refueling property; and

deductions claimed under section 190, 193, or

1253(d)(2) or (3) (as in effect before the

enactment of P.L. 103-66). Subtract any

investment tax credit recapture amount if the

basis of the property was reduced under

section 50(c) (or the corresponding provision

of prior law); any section 179 or 280F recapture

amount included in gross income in a prior tax

year; and any qualified clean-fuel vehicle

property or refueling property deduction you

were required to recapture because the

property ceased to be eligible for the deduction.

Do not include on this line any section 179

expense deduction for a partnership or an S

corporation that passed through the deduction

to its partners or shareholders.

Line 11. Enter sales commissions, advertising

expenses, attorney and legal fees, etc., in

selling the property.

Line 12. Any ordinary income recapture under

section 1245 or 1250 (including sections 179

and 291) is fully taxable in the year of sale

even if no payments were received. To figure

the recapture, complete Form 4797, Part III.

The ordinary income recapture is the amount

on line 31 of Form 4797. Enter it on line 12 of

Form 6252 and also on line 13 of Form 4797.

Do not enter any gain for this property on line

32 of Form 4797. If you used Form 4797 only

to figure the recapture on line 12 of Form 6252,

enter “N/A” on line 32 of Form 4797.

Part II—Installment Sale Income

Line 19. Enter the gross profit percentage

determined for the year of sale even if you did

not file Form 6252 for that year.

Line 21. Enter all money and the FMV of any

property you received in 1997. Include as

payments any amount withheld to pay off a

mortgage or other debt, such as broker and

legal fees. Do not include the buyer's note, any

mortgage, or other liability assumed by the

buyer. If you did not receive any payments in

1997, enter zero.

If in prior years an amount was entered on

the equivalent of line 32 of the 1997 form, do

not include it on this line. Instead, enter it on

line 23.

See Pledge rule on page 1 for details about

proceeds of debt secured by installment

obligations that must be treated as payments

on installment obligations.

Line 23. Enter all money and the FMV of

property you received before 1997 from the

sale. Include allocable installment income and

any other deemed payments from prior years.

Line 25. Enter here and on Form 4797, line

15, any ordinary income recapture on section

1252, 1254, or 1255 property. This includes

recapture for the year of sale or any remaining

recapture from a prior year sale. Do not enter

ordinary income from a section 179 expense

deduction. If this is the year of sale, complete

Form 4797, Part III. The amount from line 27c,

28b, or 29b of Form 4797 is the ordinary

income recapture. Do not enter any gain for

this property on line 31 or 32 of Form 4797. If

you used Form 4797 only to figure the

recapture on line 25 or 36, enter “N/A” on lines

31 and 32 of Form 4797.

Also report on this line any ordinary income

recapture remaining from prior years on section

1245 or 1250 property sold before June 7,

1984.

Do not enter on line 25 more than the

amount shown on line 24. The excess must

be reported in future years on Form 6252 up

to the taxable part of the installment sale until

all of the recapture has been reported.

Line 26. For trade or business property held

more than 1 year, enter this amount on Form

4797, line 4, column (g), and if applicable,

column (h). If the property was held 1 year or

less, or if you have an ordinary gain from a

noncapital asset (even if the holding period is

more than 1 year), enter this amount on Form

4797, line 10, and write “From Form 6252.”

For capital assets, enter this amount on

Schedule D as a short- or long-term gain. Use

the lines identified as from Form 6252.

Part III—Related Party

Installment Sale Income

Line 29. If one of the conditions is met, check

the appropriate box. Skip lines 30 through 37.

If you checked box 29e, attach an explanation.

Generally, the nontax avoidance exception will

apply to the second disposition if:

●A The disposition was involuntary (e.g., a

creditor of the related person foreclosed on the

property, or the related person declared

bankruptcy), or

●A The disposition was an installment sale

under which the terms of payment were

substantially equal to or longer than those for

the first sale. However, the resale terms must

not permit significant deferral of recognition of

gain from the first sale (e.g., amounts from the

resale are being collected sooner).

Line 30. If the related party sold all or part of

the property from the original sale in 1997,

enter the selling price of the part resold. If part

was sold in an earlier year and part was sold

this year, enter the cumulative amount of the

selling price.

Line 33. If you completed Part II, enter the

sum of lines 22 and 23. Otherwise, enter all

money and the FMV of property you received

before 1997 from the sale. Include allocable

installment income and any other deemed

payments from prior years. Do not include

interest whether stated or unstated.

Line 36. See the instructions for line 25 above.

Do not enter on line 36 more than the amount

shown on line 35. The excess must be

reported in future years on Form 6252 up to the

taxable part of the installment sale until all of

the recapture has been reported.

Line 37. See the instructions for line 26 above.

Paperwork Reduction Act Notice. We ask

for the information on this form to carry out the

Internal Revenue laws of the United States.

You are required to give us the information.

We need it to ensure that you are complying

with these laws and to allow us to figure and

collect the right amount of tax.

You are not required to provide the

information requested on a form that is subject

to the Paperwork Reduction Act unless the

form displays a valid OMB control number.

Books or records relating to a form or its

instructions must be retained as long as their

contents may become material in the

administration of any Internal Revenue law.

Generally, tax returns and return information

are confidential, as required by section 6103.

The time needed to complete and file this

form will vary depending on individual

circumstances. The estimated average time is:

If you have comments concerning the

accuracy of these time estimates or

suggestions for making this form simpler, we

would be happy to hear from you. See the

instructions for the tax return with which this

form is filed.

Recordkeeping ........................ 1 hr., 25 min.

Learning about the law or the

form .......................................... 40 min.

Preparing the form.................. 56 min.

Copying, assembling, and

sending the form to the IRS .. 20 min.

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