How much is our cost basis in the businesses?
You will owe tax on the capital gain on sale of the business. You will have to allocate sale proceeds to Sec 1250 assets(real property( Sec 1245 assets(other depreciable assets), Goodwill & supplies.
Gain on Sec 1250 assets will be taxed as long term capital gain unless accelerated depreciation method has been used. Gain on sec 1245 assets will be taxed at higher rates to the extent depreication claimed. Goodwill be taxed as long term capital gain.
Debts that you owe will not reduce the gain. In fact these debts are represented by the assets as you must have used the debts in buying the assets.
It is quite possible that you may have loss on sale of the business from 2006 since the assets may not be much depreciated. This loss will offset gain on other business (if both business are operated as pass thru entities or sole proprietorship). It is difficult to provide a definite answer with limited informaion. I would suggest you to talk to your tax professional and have him run some numbers for you.
Let me know if you have any question.
Please note: This advice is provided with the understanding that all the relevant facts have been provided by you. Any change in facts might affect the advice given and hence may not be relied on in such cases. Nothing contained in this reply was intended or written to be used, can be used by any taxpayer, or may be relied upon or used by any taxpayer for the purposes of avoiding penalties that may be imposed on the taxpayer under the Internal Revenue Code of 1986, as amended.
Certified Public Accountant (CPA)
CPA, MBA, Over 10 yrs of experience in tax planning and business consulting..
As previously mentioned it is difficult for me to give you information on the total tax implications as a result of the sale. By cost basis I meant the amount that you have invested in the business over a period of time minus the distributions taken by you minus losses suffered and increased by the profits you made in the business.
I would suggest you to get some tax help if not in your town....than from the place close to your town...
I need the cost of the various assets and the depreciation that has been claimed. I would also need the allocation of sale price to the various assets.
Capital gains can be defer only if you do a sec 1031 exchange which means you reinvest in another business or investment activity. It cannot be investment in an existing business or activity.