How JustAnswer Works:

  • Ask an Expert
    Experts are full of valuable knowledge and are ready to help with any question. Credentials confirmed by a Fortune 500 verification firm.
  • Get a Professional Answer
    Via email, text message, or notification as you wait on our site.
    Ask follow up questions if you need to.
  • 100% Satisfaction Guarantee
    Rate the answer you receive.

Ask Stephen G. Your Own Question

Stephen G.
Stephen G., Sr Income Tax Expert
Category: Tax
Satisfied Customers: 4018
Experience:  Extensive Experience with Tax, Financial & Estate Issues
Type Your Tax Question Here...
Stephen G. is online now
A new question is answered every 9 seconds

I sold an S Corp on 12/01/2006 for $6,067,631. Of that total

Resolved Question:

I sold an S Corp on 12/01/2006 for $6,067,631. Of that total price - $3,743,610 was allocated to Goodwill. All the money was collected except for $666,667 of the Goodwill. The purchasing company went bankrupt in 2011 and is now closed. The Goodwill was reported on an installment sale basis with a 100% gross profit percentage.

Can I now report the loss of the $666,667 as a capital loss for 2011 since that is the remainder of the money I was owed?
Submitted: 2 years ago.
Category: Tax
Expert:  Stephen G. replied 2 years ago.

Stephen E. Grizey :

Hi & thanks for using our service. I'll do my best to give you a complete & accurate answer. Please ask me to clarify anything you don't understand.

Stephen E. Grizey :

If I understand what you're saying you would not have a capital loss related to the $666.667. because you have no tax basis in that portion of the installment obligation as you never reported it as income under the installment basis.

Stephen E. Grizey :

The "lucky" aspect to it is that since you were using 100% gross profit in the installment reporting, no adjustment of the installment sale transaction needs to be made; you simply will never report the 666,667. as income and therefore you will have no deduction for a capital loss.

Customer:

You are right, I never recognized the income from that portion of the sale. Thanks for that information. May I ask you another question or do I need to go back and re-submit for a different question?

Stephen E. Grizey :

No. You can ask another question, no problem.

Customer:

What if as the portion of the purchase price of the S-Corp that I sold, a portion of it was allocated to a note that the company was to pay me back. If they then defaulted on the note, would that amount be deductible?

Stephen E. Grizey :

Only if you had reported the principal of the note as income, which you would not have done under the installment method. That's basically the same result as with the 666,667. If the 666,667. were supported by a note, there would be no different in the tax result. In other words, you have no tax basis in the note until it is reported in income.

Stephen E. Grizey :

If you lent someone money & had a note to support their obligation to you & they defaulted, you would have a bad debt deduction.

Stephen E. Grizey :

In that case you would have a tax basis in the note because you gave up money in exchange for the note.

Customer:

In that scenario, you would have had to actually lend them money right, not just "not collected" on a promise to pay.

Stephen E. Grizey :

Correct

Customer:

OK. Thanks for the information. That answers my questions.

Stephen G., Sr Income Tax Expert
Category: Tax
Satisfied Customers: 4018
Experience: Extensive Experience with Tax, Financial & Estate Issues
Stephen G. and other Tax Specialists are ready to help you

JustAnswer in the News:

 
 
 
Ask-a-doc Web sites: If you've got a quick question, you can try to get an answer from sites that say they have various specialists on hand to give quick answers... Justanswer.com.
JustAnswer.com...has seen a spike since October in legal questions from readers about layoffs, unemployment and severance.
Web sites like justanswer.com/legal
...leave nothing to chance.
Traffic on JustAnswer rose 14 percent...and had nearly 400,000 page views in 30 days...inquiries related to stress, high blood pressure, drinking and heart pain jumped 33 percent.
Tory Johnson, GMA Workplace Contributor, discusses work-from-home jobs, such as JustAnswer in which verified Experts answer people’s questions.
I will tell you that...the things you have to go through to be an Expert are quite rigorous.
 
 
 

What Customers are Saying:

 
 
 
  • I really was impressed with the prompt response. Your expert was not only a tax expert, but a people expert!!! Her genuine and caring attitude came across in her response... T.G.W Matteson, IL
< Last | Next >
  • I really was impressed with the prompt response. Your expert was not only a tax expert, but a people expert!!! Her genuine and caring attitude came across in her response... T.G.W Matteson, IL
  • I WON!!! I just wanted you to know that your original answer gave me the courage and confidence to go into yesterday's audit ready to fight. Bonnie Chesnee, SC
  • Great service. Answered my complex tax question in detail and provided a lot of additional useful information for my specific situation. John Minneapolis, MN
  • Excellent information, very quick reply. The experts really take the time to address your questions, it is well worth the fee, for the peace of mind they can provide you with. Orville Hesperia, California
  • Wonderful service, prompt, efficient, and accurate. Couldn't have asked for more. I cannot thank you enough for your help. Mary C. Freshfield, Liverpool, UK
  • This expert is wonderful. They truly know what they are talking about, and they actually care about you. They really helped put my nerves at ease. Thank you so much!!!! Alex Los Angeles, CA
  • Thank you for all your help. It is nice to know that this service is here for people like myself, who need answers fast and are not sure who to consult. GP Hesperia, CA
 
 
 

Meet The Experts:

 
 
 
  • Wallstreet Esq.

    Tax Attorney

    Satisfied Customers:

    570
    10 years experience
< Last | Next >
  • http://ww2.justanswer.com/uploads/KU/KUMI95/2013-9-30_195031_kumar.64x64.jpg Wallstreet Esq.'s Avatar

    Wallstreet Esq.

    Tax Attorney

    Satisfied Customers:

    570
    10 years experience
  • http://ww2.justanswer.com/uploads/CU/Cuttinggirl/2011-10-29_03719_wcrop2.64x64.jpg Wendy Reed's Avatar

    Wendy Reed

    Enrolled Agent

    Satisfied Customers:

    3052
    15+ years tax preparation and tax advice.
  • http://ww2.justanswer.com/uploads/CATax/2009-08-04_204548_Mark.jpg Mark D's Avatar

    Mark D

    Enrolled Agent

    Satisfied Customers:

    985
    MBA, EA, Specializing in Business and Individual Tax Returns and Issues
  • http://ww2.justanswer.com/uploads/IN/insearchoftheanswer/2013-8-16_0233_attorney.64x64.jpg Richard's Avatar

    Richard

    Tax Attorney

    Satisfied Customers:

    3229
    29 years of experience as a tax, real estate, and business attorney.
  • http://ww2.justanswer.com/uploads/MY/MyVirtualCPA/2012-7-5_44024_cookmegan1.64x64.jpg Megan C's Avatar

    Megan C

    Certified Public Accountant (CPA)

    Satisfied Customers:

    6121
    Licensed CPA, CFE, CMA who teaches accounting courses at Master's Level
  • http://ww2.justanswer.com/uploads/JG/jgordosea/2012-6-7_43138_GordosVeritas.64x64.jpg jgordosea's Avatar

    jgordosea

    Enrolled Agent

    Satisfied Customers:

    2783
    I've prepared all types of taxes since 1987.
  • http://ww2.justanswer.com/uploads/OZ/ozaukeecpa/2012-6-7_193219_Picture1croppedandshrunk.64x64.jpg MequonCPA's Avatar

    MequonCPA

    Certified Public Accountant (CPA)

    Satisfied Customers:

    2231
    CPA, Over 30 yrs experience w/individuals and small businesses. Masters in Tax.