Discussion:Repossessed installment sale

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Discussion Forum Index --> Tax Questions --> Repossessed installment sale

Fsteincpa (talk|edits) said:

12 March 2007
Hey there taxophiles, got a situation here. Gonna just state the facts and see what different suggestions you can give. I think I already know the answer, but if a better one comes along. Great. Oh, and my friend here thinks I should call H&R Block instead as they have people. Don’t worry; I threw a slipper at her.

The facts:

Client started Café in May 2005 New Equipment costs 18,000 Leasehold improvements 19,000 Start up costs amortized 10,000 <expensed 5,000 and remaining 5,000 amortized>

Depreciation expense for 2005 was 5,245 Amortization expense 283

Sold café in April 2006 for $80,000 Received $20,000 down payment Received 3 installment payments prior to default totaling 4,770

Buyers defaulted and Client repossessed the property and incurred 3,596 in additional expenses to get the café ready for resale.

Client then re-sold the café for 70,000 on October 1, 2006. Again, an installment sale.

Do I even show the first sale as an installment sale, then a gain/loss and then recalculate everything for the subsequent sale?

Or, as I expect, show the original installment sale, then the gain/loss on repossession and then with the new calculated basis generate a new installment sale transation.

If this occurred within two different tax years, it would be much easier, but, since it was all within the same year, it is more complex <at least to me>

So, any words of advice would be helpful.

Kevinh5 (talk|edits) said:

12 March 2007
Installment sale 1, repossession gain or loss, installment sale 2

Riley2 (talk|edits) said:

12 March 2007
You have 3 dispositions to report: 1) Sale in April of 2006; 2) Sec. 453B disposition on repo; and 3) Sale in October of 2006.

Deback (talk|edits) said:

March 12, 2007
See Publication 537, starting on page 11, for worksheets that will be very helpful in doing the calculations for this.

Dennis (talk|edits) said:

12 March 2007
Interestingly there seem to be no installment sales. Sale 3 is a loss.

Fsteincpa (talk|edits) said:

12 March 2007
I had already looked at Pub 537 and had figured that I had to work it out the long way. Was hoping, but wasn't expecting a shortcut <G>. I expected that the re-sale would result in a loss, but have not gone through the formal calculation process. That will be later on this evening.

Thanks for the responses.


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