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Bookkeeping & Tax on Owner Finance Sale
I sold a property thru owner finance, but I have a question about the bookkeeping/tax side of it. Here is the journal entry for it basically
My questions are:
- Is the journal entry correct?
- 26K is quite a bit of revenue to pay tax on. I won't receive all of them until the loan is paid off. Should I claim of the 26K this year on revenue?
- What would my bookkeeping journal entry be if/when the buyer defaults on payments, and I get the property back?
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Eamonn McElroy
#5 Tax, SDIRAs & Cost Segregation Contributor
#5 Tax, SDIRAs & Cost Segregation Contributor
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- Atlanta, GA
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Eamonn McElroy#5 Tax, SDIRAs & Cost Segregation Contributor
#5 Tax, SDIRAs & Cost Segregation Contributor
- Accountant
- Atlanta, GA
As you have an installment sale for tax purposes, you won't recognize the $26k of gain immediately.
Each payment contains a return of cost basis component, a gain component, and an interest component.
Encourage you to work with a tax CPA/EA if you're not comfortable determining the components and reporting requirements (Form 6252).