cientax Posted May 17, 2010 Report Share Posted May 17, 2010 Client bought home 09-17-2008 then sold it on 12-01-2008 with gain of about $7,000 and is seller financed. I did not prepare his 2008 return, someone else dit. They did not report the sale on the tax return because the preparer told him that he would not get a good refund. Instead of reporting the sale the preparer reported the home as a rental only to deduct the property taxes on Sch-E to offset other rental income. for 2009 the preparer continued to report the home as rental property and included some income that the client did not receive for the same and deducted again property taxes that the client did not pay. The income received was installment payments on the note. I know that the taxpayer can elect out of the installment sales method by reporting the sale on the Sch-D and nothing on the 6252, but if the sale was not reported at all for the year of sale (2008) can we still go back and report it as an installment sale on an amended return and correct also the 2009 tax return? The house was never a retnal, he only held it for approx two months then sold it. He is receiving monthly installments on 15 year note. Also the preparer failed to include the interest received from each payment. Quote Link to comment Share on other sites More sharing options...
jainen Posted May 19, 2010 Report Share Posted May 19, 2010 >>can we still go back and report it as an installment sale<< That is the only option (other than leaving it wrong). He can't elect out of installment treatment at this time. Did you ask why he was leaving the other preparer? My clairvoyant intuition thinks his story is rather unlikely. Quote Link to comment Share on other sites More sharing options...
OldJack Posted May 19, 2010 Report Share Posted May 19, 2010 Something is fishy about this story. Is it actually a sale of rental property or the sale of a residence? Why would the other tax preparer have said it would cost him taxes if in fact it would not have cost him taxes because he did not receive any money? Or, did he receive a down payment in the year of sale? You have to establish facts before deciding what to do. Quote Link to comment Share on other sites More sharing options...
GeneInAlabama Posted May 19, 2010 Report Share Posted May 19, 2010 I wonder if it could have been a rent to buy transaction. If so, what would be the proper way to handle it? Quote Link to comment Share on other sites More sharing options...
cientax Posted May 20, 2010 Author Report Share Posted May 20, 2010 I have all of the paperwork for when he bought the property and when he flipped it. He bought it Sept 2008 and sold it Dec 2008 and never rented the property. I don't know why the other preparer reported it as rental in the year of sale and then continued to show it as rental in the year after sale when the paper work is there to show that it was sold as an installment sale. The contract, Hud 1 form and amortization shcedule are all there. From what I gather is that if he were to report it electing out of an installment sale on the 2008 return he would not have received a larger refund because of the gain. Reporting it as an installment sale then there is no capital gain to show because there were no payments received until after the end of the year. Thanks for the help. Quote Link to comment Share on other sites More sharing options...
jainen Posted May 20, 2010 Report Share Posted May 20, 2010 >>I don't know why the other preparer reported it as rental in the year of sale and then continued to show it as rental in the year after sale<< Are you planning to find out? Quote Link to comment Share on other sites More sharing options...
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