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MT online Form 6252: What You Should Know
Generally, the tax principle for installment sales is the same as ordinary income tax treatment. In certain circumstances the form of income (i.e., the method of reporting) used by the taxpayer may increase or decrease tax liability. Note: The purchaser may owe an adjustment for expenses incurred. The purchaser should file Form 8938 with the IRS to report expenses that might be deducted in determining the amount of the sale. The purchaser can deduct certain expenses incurred prior to the completion of the transaction. If expenses were incurred, you cannot deduct the difference between their actual costs (less allowable expenses) and the amount paid for the inventory. See chapter 10 for more information. Other Considerations To determine whether a tax deduction is allowed for the items sold on eBay, you must meet the following criteria: Did you expect the sale to close within the time limit or more than one year? If yes, did you expect to receive the proceeds of the sale in cash? Did you use a written contract to describe the transaction? If yes, did you follow these special procedures? If yes. . . You can deduct the proceeds of the sale. For example. . . For sales that are to close within one year or less, deduct 15% of the selling price. For sales over one year, this amount is deductible as a capital account adjustment. Note: If you use a written contract, you can deduct the additional cost of the written contract as a business expense. For more information, see Chapter 12 of IRS Pub 894, Seller's Business Expenses. For sales for which an installment receipt was issued and there are no payments received within one year (e.g., the transaction was completed in the first 90 days of the year), deduct the entire amount. For example, if a sale price for 3000 includes 3000 cash and 2500 in payment received, you must pay the remaining 250 in the manner described in IRS Pub 894, Seller's Business Expenses. For sales that are to close within one year of the date on which the invoice is mailed, deduct the entire amount. For example, if a purchase price for furniture with a payment due on or before the close of business on November 30 is 1500, you can recover 15% of the sale price as of December 1 (or the next day if earlier).
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