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DanielleCPA
DanielleCPA, Certified Public Accountant (CPA)
Category: Finance
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Experience:  CPA experienced in tax and financial planning
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I am selling a company, and I agreed with someone that he would

Resolved Question:

I am selling a company, and I agreed with someone that he would receive 40% of the sale in such an event. On paper, I am the sole proprietor.

Is there any way to avoid being double-taxed on the income of the sale?
Submitted: 3 years ago.
Category: Finance
Expert:  DanielleCPA replied 3 years ago.

DMC :

Hi and welcome to Just Answer! I'm happy to help answer your Finance questions. Feel free to interject at any time if you need clarification.

DMC :

So I can better answer your question, please let me know, why are sharing the 40% with the other person?

Customer:

He put in a significant amount of work into the business.

DMC :

Since you are the sole proprietor of the business, you will need to report all of the income from the sale on your tax return.

DMC :

However, I think it would be reasonable to deduct the 40% as a business expense and issue the other person a 1099 for his share of the money.

Customer:

Well, would it make sense to file a 1065 for this transaction?

DMC :

I don't think it would make sense to set up a partnership for the sole purpose of selling your sole proprietorship.

Customer:

(He has invested some of his own captial in the business in the past)

Customer:

okay, thank you very much!

DanielleCPA, Certified Public Accountant (CPA)
Category: Finance
Satisfied Customers: 683
Experience: CPA experienced in tax and financial planning
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