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Lev
Lev, Tax Advisor
Category: Tax
Satisfied Customers: 28084
Experience:  Taxes, Immigration, Labor Relations
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I have a tax client that sold a list of "clients" but kept

Customer Question

I have a tax client that sold a list of "clients" but kept his business. I am pretty sure I have to treat this as a sale of an intangible asset. But can this sale be spread out over more than one year?
Submitted: 3 years ago.
Category: Tax
Expert:  Lev replied 3 years ago.

LEV :

Hi and welcome to Just Answer!
You are correct - that is a sale of the intangible asset - and the gain is treated as a capital gain - not subject of self-employment taxes.
However - because that is self-created asset - the gain is not eligible for long term capital gain treatment - but will be taxed as a regular income.

LEV :

An installment sale is a sale of property where at least one payment is to be received after the tax year in which the sale occurs. You are required to report gain on an installment sale under the installment method unless you “elect out” on or before the due date for filing your tax return (including extensions) for the year of the sale. You may “elect out” by reporting all the gain as income in the year of the sale.

Expert:  Lev replied 3 years ago.
Just in case you were not able to use the chat - I am switching to Q&A mode and porting the answer below.
Please feel free to communicate if you need any clarification or have other tax related issues.

Hi and welcome to Just Answer!
You are correct - that is a sale of the intangible asset - and the gain is treated as a capital gain - not subject of self-employment taxes.
However - because that is self-created asset - the gain is not eligible for long term capital gain treatment - but will be taxed as a regular income.
An installment sale is a sale of property where at least one payment is to be received after the tax year in which the sale occurs. You are required to report gain on an installment sale under the installment method unless you “elect out” on or before the due date for filing your tax return (including extensions) for the year of the sale. You may “elect out” by reporting all the gain as income in the year of the sale.