grandmabee Posted March 28, 2011 Report Share Posted March 28, 2011 CLIENT had fishing boat and sold on installment sale but kept the contract with fisheries so that he receives the money for each catch paid to him. then he pays the buyer 75% of the catch and the other 25% goes as a payment on the sale. I show on 6252 and interest on sch B. they also give the new owner a 1099 for the 75% of the catch. my client does not receive a 1099 from the fisheries. I know what the answer is but I not sure if I am reporting in on the right forms or not. My client is no longer fishing so if I fill at a sch c and show the gross received for catch and then show the 75% paid out the new owner and then misc deduction as payment to contract of sale. it would come out the right answer. 0 sch C and gain on 6252 Not sure If I should continue to do sch C. but he does receive 100% of money for the catch. any thoughts? thanks Quote Link to comment Share on other sites More sharing options...
Pacun Posted March 28, 2011 Report Share Posted March 28, 2011 It is not clear who gets the whole catch. If your client gets the catch, what does he do with it? That's the answer to both questions. Quote Link to comment Share on other sites More sharing options...
SunTaxMan Posted March 28, 2011 Report Share Posted March 28, 2011 If the client who sold the boat is not involved in the day to day fishing activity, just receiving the proceeds and forwarding 75% to buyer, why not that same 75% as rental income on Sched E, with identical payout as expense on E and 25% split as income on 6252 and B? Quote Link to comment Share on other sites More sharing options...
grandmabee Posted March 28, 2011 Author Report Share Posted March 28, 2011 It is not clear who gets the whole catch. If your client gets the catch, what does he do with it? That's the answer to both questions. my client gets paid by the fisheries but he does not fish at all. the reason he gets the money is because he didn't trust the buyer to forward his payments for the boat sale to him. the terms of the sale was that 75% of the catch went to the buyer and 25% of the catch went to the seller until the full price was paid Quote Link to comment Share on other sites More sharing options...
Pacun Posted March 28, 2011 Report Share Posted March 28, 2011 my client gets paid by the fisheries but he does not fish at all. the reason he gets the money is because he didn't trust the buyer to forward his payments for the boat sale to him. the terms of the sale was that 75% of the catch went to the buyer and 25% of the catch went to the seller until the full price was paid Wow, I guess my brain is not working these days. Let say that the catch is 1000 fish and they sell each fish at $2. Does your client receive 250 fish or $500. If he gets $500, you just divide that between payment for the boat and insterest, no Schedule C or E involved. Quote Link to comment Share on other sites More sharing options...
grandmabee Posted March 28, 2011 Author Report Share Posted March 28, 2011 Wow, I guess my brain is not working these days. Let say that the catch is 1000 fish and they sell each fish at $2. Does your client receive 250 fish or $500. If he gets $500, you just divide that between payment for the boat and insterest, no Schedule C or E involved. the oral contract says. 100% of fish income is paid to my client he then gives the buyer 75% of the income and keeps the 25% for the payment on the boat. this wouldn't be a problem if the fisheries would pay the buyer directly instead of my client but it was set up this way so my client would get his payment. Quote Link to comment Share on other sites More sharing options...
jainen Posted March 28, 2011 Report Share Posted March 28, 2011 >> set up this way so my client would get his payment<< I don't see that as a problem for your client, although the buyer is cheating. Your client is receiving payment as an agent for the boat operator. Your client should report the 25% as payment on the installment, allocated first to interest and the balance to Form 6252 subject to the gross profit percentage of the original sale. Nobody's asking, but the boat operator should report 100% of the income, not 75%. Quote Link to comment Share on other sites More sharing options...
grandmabee Posted March 28, 2011 Author Report Share Posted March 28, 2011 >> set up this way so my client would get his payment<< I don't see that as a problem for your client, although the buyer is cheating. Your client is receiving payment as an agent for the boat operator. Your client should report the 25% as payment on the installment, allocated first to interest and the balance to Form 6252 subject to the gross profit percentage of the original sale. Nobody's asking, but the boat operator should report 100% of the income, not 75%. thank you. I knew how it was supposed to turn out but was not sure if I needed to show that he got the money and then paid out. Quote Link to comment Share on other sites More sharing options...
jainen Posted March 28, 2011 Report Share Posted March 28, 2011 >>show that he got the money and then paid out<< If the fisherie 1099d him, it wouldn't be pretty. He should at least keep a little logbook or journal. Quote Link to comment Share on other sites More sharing options...
SunTaxMan Posted March 28, 2011 Report Share Posted March 28, 2011 But.... the boat operator us not receiving, actually or constructively, 100% Quote Link to comment Share on other sites More sharing options...
SunTaxMan Posted March 28, 2011 Report Share Posted March 28, 2011 I agree that thus "system" shows an untrue picture of Gross Revenue, but the Net Profit is accurate. Quote Link to comment Share on other sites More sharing options...
Bart Posted March 28, 2011 Report Share Posted March 28, 2011 CLIENT had fishing boat and sold on installment sale but kept the contract with fisheries so that he receives the money for each catch paid to him. then he pays the buyer 75% of the catch and the other 25% goes as a payment on the sale. I show on 6252 and interest on sch B. they also give the new owner a 1099 for the 75% of the catch. my client does not receive a 1099 from the fisheries. I know what the answer is but I not sure if I am reporting in on the right forms or not. My client is no longer fishing so if I fill at a sch c and show the gross received for catch and then show the 75% paid out the new owner and then misc deduction as payment to contract of sale. it would come out the right answer. 0 sch C and gain on 6252 Not sure If I should continue to do sch C. but he does receive 100% of money for the catch. any thoughts? thanks Your client should show receipts of 100% and then 1099 the buyer 100% to zero out his schedule C. That would report the income to the correct person and your client could then report his receipt of of cash on the installment sale. I would not worry about if the buyer is doing his bookkeeping correctly by claiming 100% income or by claiming the expense/purchase of the 25% cash he never receives. Quote Link to comment Share on other sites More sharing options...
grandmabee Posted March 28, 2011 Author Report Share Posted March 28, 2011 Your client should show receipts of 100% and then 1099 the buyer 100% to zero out his schedule C. That would report the income to the correct person and your client could then report his receipt of of cash on the installment sale. I would not worry about if the buyer is doing his bookkeeping correctly by claiming 100% income or by claiming the expense/purchase of the 25% cash he never receives. that is what I was doing but he is not actualy in business any more. the other problem that my client sent a 1099 out to the buyer for only 75% not the 100% I am telling him to correct that. Quote Link to comment Share on other sites More sharing options...
jainen Posted March 28, 2011 Report Share Posted March 28, 2011 >>the boat operator us not receiving, actually or constructively, 100%<< Yes, he is. He has directed the fisherie to route the payment through the seller, who acts as his agent in receiving and forwarding it. We don't have to call that "laundering" because facilitating his payment (which varies each month) is a valid business purpose. But it doesn't change the fact that he actually earned 100% and used part to pay his own legitimate debt. This is a good example of the doctrine of economic substance over form, which the IRS is really pushing hard these days. Quote Link to comment Share on other sites More sharing options...
kcjenkins Posted March 29, 2011 Report Share Posted March 29, 2011 The buyer should get a 1099 for the entire amount of the sales, then a 1098 for the interest paid on the note, and the difference between what he got paid from the seller and the amount in the 1099 plus the 1098 is the amount of principle he paid on his note. Quote Link to comment Share on other sites More sharing options...
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