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Jon Andrews
Jon Andrews, Certified Public Accountant (CPA)
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I sold my half of an s-corp in Feb 2010 to the other 50% owner

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I sold my half of an s-corp in Feb 2010 to the other 50% owner.  I am financing it at 2.45% per year payable in 5 installments of $20,000.00. I received the first installment at closing with $20,000.00 due each year for the next 4 years. Since then I have formed a sole proprietorship bringing in $2,900.00 gross each month as a contract oil & gas well tender.   I bought (financed with $5000.00 dwn.) a new truck for for $30,000 for work only, a computer and a printer. I drive appr. 100 miles a day 5 days a week. My expenses are mostly fuel (around $600.00 month), maintence, insurance, payment etc. for truck, and a small amount of office supplies. Do I count the $20,000.00 payment as income and should I depreciate or count mileage? I need to make an estimated tax payment on the 15th, and need to estimate my income for 2010.  Do I need to make a quarterly est. payment, or can I pay at the end of the year, and if I make est payments is there a % of tax. income I need to pay?
Submitted: 4 years ago.
Category: Tax
Expert:  Jon Andrews replied 4 years ago.

First the easy part - for 2010 the mileage rate is 50 cents.

 

With regard to your stock sale - the sale you describe is an installment sale. You need to figure your total gain and then pay tax on a percentage of each principal payment you receive including the down payment. The sales price is $100,000. You will need to determine your tax basis. This is the amount you originally invested PLUS any income earned by the S corp during your ownership MINUS any distributions that you took. There are some other items that factor into the basis, but those are the primary ones.

 

With regard to your new business - you will end up owing both income tax and self employment tax. For the first quarter, your net income from this business is going to be relatively small. In fact, you could probably say that the NET for the first quarter is $0 due to vehicle expenses and your other expenses.

 

So, for the first quarter, you really only need to pay an estimated payment based on the stock sale. Whatever your gain is times 15% should be sufficient. For example, if the entire amount is gain, you would pay tax on the $20K you received at 15% = $3,000.

 

It will be better for you to make some quarterly payments so that you are not subjected to penalties for not paying them when you file your return next year.

 

jon

Customer: replied 4 years ago.
Ok. Thanks, XXXXX XXXXX alot. Haven't got to see my accountant yet. Based on what you say, Do you think I should do the mileage then, instead of expenses?
Expert:  Jon Andrews replied 4 years ago.

For purposes of filing the first quarter estimate, I would probably use the expenses. This is not something that is sent in - it is just how you determine how much to send in. You can decide at the end of the year which way you want to go for the actual tax return filing.

 

jon

Jon Andrews, Certified Public Accountant (CPA)
Category: Tax
Satisfied Customers: 3118
Experience: I deal with all levels of tax planning and controversy - from the ordinary to the complex.
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