Form 6252 (2019)
Page 2
General Instructions
Section references are to the Internal
Revenue Code unless otherwise noted.
Future Developments
For the latest information about
developments related to Form 6252 and
its instructions, such as legislation
enacted after they were published, go to
www.irs.gov/Form6252.
What’s New
Installment sale reporting. In 2019 and
later, if you have an outstanding
installment sale balance after the initial
year, complete lines 1 through 4, Part I,
and Part II for each year of the installment
agreement. If you sold property to a
related party during the year, also
complete Part III.
Purpose of Form
Use Form 6252 to report income from an
installment sale on the installment
method. Generally, an installment sale is a
disposition of property where at least one
payment is received after the end of the
tax year in which the disposition occurs.
Ordinarily, an installment sale doesn’t
include a disposition of personal property
by a person who regularly sells or
otherwise disposes of personal property
of the same type, or a disposition of real
property which is held by the taxpayer for
sale to customers in the ordinary course
of the taxpayer’s trade or business.
However, gain on some dispositions by
dealers in real property or farmers who
dispose of any property used or produced
in the trade or business of farming may be
reported on the installment method.
Don’t file Form 6252 for sales that don’t
result in a gain, even if you will receive a
payment in a tax year after the year of
sale. Instead, report the entire sale on
Form 4797, Sales of Business Property,
Form 8949, Sales and Other Dispositions
of Capital Assets, or the Schedule D for
your tax return, whichever applies.
Don’t file Form 6252 to report sales
during the tax year of stock or securities
traded on an established securities
market. Instead, treat all payments as
received during the year of sale.
Don’t file 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) on Form 4797, Form 8949, or
the Schedule D for your tax return,
whichever applies. If you filed your
original return on time without making the
election, you can make the election on an
amended return filed no later than 6
months after the due date of your tax
return, excluding extensions. Write “Filed
pursuant to section 301.9100-2” at the
top of the amended return.
Which Parts To Complete
For All Years
Complete lines 1 through 4, Part I, and
Part II. If you sold property to a related
party during the year, also complete Part
III. Complete Form 6252 for each year of
the installment agreement, including the
year of final payment, even if a payment
wasn’t received during the year.
If you sold a marketable security to a
related party after May 14, 1980, and
before 1987, complete Form 6252 for
each year of the installment agreement,
even if you didn’t receive a payment.
Complete lines 1 through 4. Complete
Part III unless you received the final
payment during the tax year.
After 1986, the installment method isn’t
available for the sale of marketable
securities.
Note: If you sold property other than a
marketable security to a related party
after May 14, 1980, complete Form 6252
for the year of sale and for 2 years after
the year of sale, even if you didn’t receive
a payment. Complete lines 1 through 4.
Complete Part II for any year during this
2-year period in which you receive a
payment from the sale. Complete Part III
for the 2 years after the year of sale
unless you received the final payment
during the tax year.
Special Rules
Interest
If any part of an installment payment you
received is for interest or original issue
discount, report that income on the
appropriate form or schedule. Don’t
report interest received, carrying charges
received, or unstated interest on Form
6252. See 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 isn’t 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 doesn’t
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 can’t report the sale using
the installment method. For this purpose,
depreciable property is any property that
(in the hands of the person or entity to
whom you transfer it) is subject to the
allowance for depreciation. However, you
can use the installment method if you can
show to the satisfaction of the IRS that
avoidance of federal income taxes wasn’t
one of the principal purposes of the sale
(for example, no significant tax deferral
benefits will result from the sale). If the
installment method doesn’t apply, report
the sale on Form 4797, Form 8949, or
Schedule D, 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 can’t be readily
determined, basis is recovered ratably.
Pledge Rule
For certain dispositions under the
installment method, if an installment
obligation is pledged as security on a debt,
the net proceeds of the secured debt are
treated as payment on the installment
obligation. However, the amount treated as
payment can’t be more than the excess of
the total installment contract price over
any payments received under the contract
before the secured debt was obtained.
An installment obligation is pledged as
security on a debt to the extent that
payment of principal and interest on the
debt is directly secured by an interest in
the installment obligation. For sales after
December 16, 1999, payment on a debt is
treated as directly secured by an interest in
an installment obligation to the extent an
arrangement allows you to satisfy all or part
of the debt with the installment obligation.
The pledge rule applies to any
installment sale after 1988 with a sales
price of over $150,000 except:
• Personal use property disposed of by an
individual,
• Farm property, and
• Timeshares and residential lots.
However, the pledge rule doesn’t 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 installment
obligations on that date and at all times
after that date until the refinancing. This
exception doesn’t 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
doesn’t affect refinancing due to the calling
of a debt by the creditor if the debt is then
refinanced by a person other than this
creditor or someone related to the creditor.