michaelmars Posted October 12, 2011 Report Share Posted October 12, 2011 a few years ago, taxpayer sold his kids a rental property in an installment. this year he says he wants to forgive the yearly principal due as a gift to kids. How does he report this, does he still pay tax on the 6251 as if it were received or does he adjust his sales price and treat it as a reduction? Quote Link to comment Share on other sites More sharing options...
michaelmars Posted October 12, 2011 Author Report Share Posted October 12, 2011 Thinking this through i think the parent can do it and the kids have to reduce their depreciable basis by the same amount. Quote Link to comment Share on other sites More sharing options...
jainen Posted October 12, 2011 Report Share Posted October 12, 2011 >>Thinking this through...< How about looking it up instead? Installment method is not allowed for a sale of depreciable property to related parties! Otherwise, Pub 537 has a worksheet to recalculate the gross profit percentage for remaining payments. Quote Link to comment Share on other sites More sharing options...
michaelmars Posted October 12, 2011 Author Report Share Posted October 12, 2011 i know its not allowed but this started around 1990 way before my time. the parent wants to forgive the remaining balance. at this point i don't want to change what was done for 20 years. besides do you know if it was even not allowed in the 90's? Quote Link to comment Share on other sites More sharing options...
jainen Posted October 12, 2011 Report Share Posted October 12, 2011 >>do you know if it was even not allowed in the 90's?<< Yes, that provision has not changed since the current tax code was adopted in 1954. However, you can't change an accounting method (even one that is not allowed) without IRS approval, so the best you can do now is look up the procedures for disposing of an installment obligation. Quote Link to comment Share on other sites More sharing options...
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