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Hi and welcome to our site!If you sold your business on installment - you might be eligible to use installment method to report your income. So - you will avoid tax liability on that "phantom income"The note is considered an asset - and if you will sell the note and recognize the loss - that loss is deductible. However if sold to a related party - as to another company which you own - the loss may not be used to offset your other income.Also - you need to be clear if sold your business as assets sale - in this case - not all proceeds might be taxed as a capital gain.
it is an asset sale
but there were no assets worth mentioning
a few supplies, and a truck
but nothing close to the sale amount
Still you need to assign the sale price to specific assets - do you have a list if items you actually sold?
so what do we do with the balance?
that is the installment method
the balance would be considered a self-created intangible goodwill - and will be taxed as a regular income - not as a capital gain.
wow...why not cap gains?
i was under the impression that a business sale is cap gains
Self-created intangibles are not taxes as a capital gain.
so what about things like customer accounts...are those intangible good will or an asset??
we had customer contracts that had years of service left
These are also intangibles - and also self-created - if were created during your normal business operations and not purchased.
Similar - not compete agreement if you have any - you need a full list of items you actually sold as your business assets.
meaning that non-compete is not something sold but something intangible, right?
so if i bought a business and sold that business it would be Cap Gains...but since i created this it is intangible and thus ordinary income??
or am i missing something
Here is a brief description of aspects to consider when you are selling business assets - http://www.irs.gov/pub/irs-utl/33_-_sale_of_business_assets_-_taking_the_mystery_out_of_form_4797.pdf
Yes - normally - when you are selling the business the part of your selling contract is an agreement which prevent you from competing with the buyer. And that agreement has a value and is considered a non-tangible asset.
ty for the info