Form 6252 (2018)
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
Special rules for capital gains invested
in Qualified Opportunity Funds. In
2018, if you have a capital gain you can
invest that gain into a Qualified
Opportunity Fund and elect to defer part
or all of the gain that you would
otherwise include in income until
December 31, 2026. You also may be
able to permanently exclude gain from
the sale or exchange of an investment in
a Qualified Opportunity Fund if the
investment is held for at least 10 years.
For information about how to elect to
use these special rules, see the
Instructions for Form 8949.
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
Year of Sale
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.
Later Years
Complete lines 1 through 4 and Part II
for any year in which you receive a
payment from an installment sale.
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 II for any year in which you receive a
payment from the sale. 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.
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.