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RD, Certified Public Accountant (CPA)
Category: Tax
Satisfied Customers: 8784
Experience:  CPA, MBA, Over 10 yrs of experience in tax planning and business consulting..
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I am selling a small lawn and landscape business and I want

Resolved Question:

I am selling a small lawn and landscape business and I want to have a basic understanding. I will be meeting with my accountant but before I do-please let me know if I am even close in my train of thought:

Business sale price: $85,000

New owner wants to allocate $27,000 toward equipment- I paid $24,000. I have taken the depreciation for all equipment in the year purchased.

The remaining $58,000 would be goodwill. Is this the amount that would incurr the capital gains tax (+ the $3,000 from the equipment? Is there any major piece I'm missing (I've read that I need a particular amount alloted to a Non-Solicit and Non-Compete)?

If I am going to tithe to my church $8,500 from the sale, is it subtracted from the total amount set to incur capital gains tax (so in my scenario $58,000 + $3,000 - 8,500 = $52,500 to be taxed at capital gains rate).

My itemized personal return (business is set up as an S-corp and this would be *obviously* an asset sale) will be $30,000 or less.
Submitted: 6 years ago.
Category: Tax
Expert:  RD replied 6 years ago.
Since the equipment is fully written off- the entire amount of $27000 allocated to equipment will be taxed as part of ordinary income due to recapture of the depreciation(tax benefit) that you claimed on this equipment.

Goodwill will be taxed as capital gain.(taxable upto a maximum rate of 15% for federal tax purposes -long term rate if the business was more than a year old).

Charitable contribution will be deductible as part of the itemized deduction on your personal tax return and will reduce your tax to some extent.

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.

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