Sch C reporting of installment sales for residential lot dealers

[Michael Plaks]

I usually answer, but now is my turn to ask.

Dealers of residential lots are allowed to use installment sale method. If said dealer operates as an S-corp or partnership - reporting is fairly straightforward. But what if he is Sch C?

Specifically, if I use Form 6252, all his gain installments end up on 4797, as they normally should. However, in this case, since he is a dealer - these installments are subject to SE tax, offset by business overhead expenses.

In other words, if I use 6252, I end up splitting the business between two lines of 1040: zero-income/large-expenses Schedule C and 4797 gain. Two problems with this outcome:

1. major audit flag on zero-income Sch C
2. installment income improperly escapes SE tax

My solution is to manually calculate installment income and enter it on Sch C, forgoing 6252.  Anybody has a better solution?

@Lance Lvovsky, @Brandon Hall, @Ashish Acharya, @Natalie Kolodij, @Basit Siddiqi, @Nicholas Aiola, @Vlad K., @Paul Allen, @John Woodrich, @Daniel Hyman - thanks in advance for chiming in!