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The installment method can be used to defer some tax on capital gains, as long as you receive at least one payment for a piece of property after the year of the sale. It can't be used if the sale results in a loss. The bad news is that payments for many (or even most) of the assets of your business are not eligible for installment sale treatment. In most cases, only gain on assets that have appreciated in value beyond their original purchase price will be eligible for installment sale treatment.
Installment sales are reported on IRS Form 6252. A separate form should be filed for each asset you sell using this method. You must file this form in the year the sale occurs, and in every later year in which you receive a payment.
Form 6252, Installment Sale Income
The file is in Adobe portable document format (PDF), which requires the use of Adobe Acrobat Reader.
To get a free version of Adobe Acrobat Reader software, go to the Adobe web site.
For more information, see our discussion of installment sales.
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