peggysioux5 Posted March 12, 2021 Report Share Posted March 12, 2021 I am working through the calculations of the reduced sales price to determine new gross profit percentage for installment sale, but am uncertain on how to handle some aspects of worksheet that are found in pub 537. Example: Original sale price: $350,000 Adj. basis: $275,000 Reduced sale price: $340,000 Installment sale income rpt prvsly ($130,000) _______ Calculations $340,000 less Adj basis $275,000 Net: $ 65,000 Less prvs income $130,000 Net: ( $65,000) Future Instll Pymt: $210,000 Worksheet directs me to divide the (65,000) by $195,000 to determine new gross profit percentage. So do I have a new gross profit percentage of zero? Peggy Sioux Quote Link to comment Share on other sites More sharing options...
Lee B Posted March 12, 2021 Report Share Posted March 12, 2021 No, old Gross Profit % 21.00 % New Gross Profit % 19.12 % When you say Income previously reported, what you probably mean is Principal previously reported. Gross Profit previously reported 130,000 x .21 = $ 27,300 New Gross Profit $ 65,000 less $ 27,300 = $37,700 ( Gross Profit remaining to report) I did this quickly off the top of my head so if I screwed up I will fall on my sword However even if I made some numerical mistakes, the way the numbers need to crunch still follows the same pattern Quote Link to comment Share on other sites More sharing options...
Slippery Pencil Posted March 12, 2021 Report Share Posted March 12, 2021 Sale $350K Basis 275K Gain 75K How do you get previously reported income of $130K when there's only $75 of gain? 1 Quote Link to comment Share on other sites More sharing options...
peggysioux5 Posted March 12, 2021 Author Report Share Posted March 12, 2021 26 minutes ago, cbslee said: No, old Gross Profit % 21.00 % New Gross Profit % 19.12 % When you say Income previously reported, what you probably mean is Principal previously reported. Gross Profit previously reported 130,000 x .21 = $ 27,300 New Gross Profit $ 65,000 less $ 27,300 = $37,700 ( Gross Profit remaining to report) I did this quickly off the top of my head so if I screwed up I will fall on my sword However even if I made some numerical mistakes, the way the numbers need to crunch still follows the same pattern You are correct; I was mistakenly using the "principal previously reported" and not the "installment sale income". Thank you so much!!! Makes so much more sense now!! Peggy Sioux 1 Quote Link to comment Share on other sites More sharing options...
peggysioux5 Posted April 1, 2021 Author Report Share Posted April 1, 2021 Another question regarding the reporting of new gross profit percentage due to reduction in sales price for an installment sale.....Do you adjust Part 1 of the 6252 when you have a new gross profit percentage due to reduction in sales price or leave all information as originally input and just change the gross profit percentage based on new calculations? Peggy Sioux Quote Link to comment Share on other sites More sharing options...
Lee B Posted April 1, 2021 Report Share Posted April 1, 2021 Pub 537 1 Quote Link to comment Share on other sites More sharing options...
peggysioux5 Posted April 1, 2021 Author Report Share Posted April 1, 2021 I reviewed Pub 537 and do not see any instruction regarding updating Part 1 of form 6252. Pub 537 is where I found the worksheet for the recalculation of gross profit percentage. Pub 537 instructions show a recalculation is required but does not go into detail about updating the 6252. The instructions for form 6252 also provide no info regarding updating form due to recalculation. Peggy Sioux Quote Link to comment Share on other sites More sharing options...
Abby Normal Posted April 1, 2021 Report Share Posted April 1, 2021 I think I'd recalculate the gain from the start until 12/31/20, using the corrected profit %, then subtract the amount of gain already reported in earlier years, and "force" the gain on the 2020 return to be the amount needed to make the cumulative gain correct. A "catch up," if you will. Then leave yourself a note to change the profit % on the 2021 return. 1 Quote Link to comment Share on other sites More sharing options...
Catherine Posted April 2, 2021 Report Share Posted April 2, 2021 1 hour ago, Abby Normal said: Then leave yourself a note to change the profit % on the 2021 return. Ye olde "make the return correct, despite what the program wants to do." Times come when that is needful. This sounds like one of them. Quote Link to comment Share on other sites More sharing options...
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