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Lev
Lev, Tax Advisor
Category: Tax
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Experience:  Taxes, Immigration, Labor Relations
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Me and mu husband are both over 65 yrs,i sold my medical

Customer Question

me and mu husband are both over 65 yrs,i sold my medical practice in November this year and the real estate was for $500,000 and the practice and contents were for $300,000,what deductions can we get
Submitted: 11 months ago.
Category: Tax
Expert:  Lev replied 11 months ago.

The sale of a business usually is not a sale of one asset. Instead, all the assets of the business are sold.

Generally, when this occurs, each asset is treated as being sold separately for determining the treatment of gain or loss.

When sold, these assets must be classified as capital assets, depreciable property used in the business, real property used in the business, or property held for sale to customers, such as inventory or stock in trade.

The gain or loss on each asset (or a group of similar assets) is figured separately.

The sale of capital assets results in capital gain or loss.

The sale of real property or depreciable property used in the business and held longer than 1 year results in gain or loss from a section 1231 transaction.

The sale of inventory results in ordinary income or loss.

The sale of self-created intangible assets is taxed as ordinary income.

Liabilities assumed by the purchaser is treated as cash payment.

Generally, both the purchaser and seller must file Form 8594 and attach it to their income tax returns when there is a transfer of a group of assets that make up a trade or business and the purchaser s basis in such assets is determined wholly by the amount paid for the assets.

So - we need to start with a list of assets - and will need to assigned a sale price to each asset - as agreed between parties.Then - we will determine the gain or loss on each asset separately and separately will determine how that gain or loss is treated.

To calculate the gain separate for each asset - we should take (assumed sale price) MINUS (adjusted basis) = gain

Here is the form to use

http://www.irs.gov/pub/irs-pdf/f8594.pdf

For the real estate - we need to know your adjusted basis - so we may estimate your gain or loss.

For the practice and contents - we need a list of items. allocated sale price, and the basis for each item.

If you briefly describe assets, their selling prices and basis - we may verify the gain and how that gain is taxed.

Customer: replied 11 months ago.
Real estate purchase price was $500,000 , assets $50000,goodwill and intangibles $175000, accounts receivable $75000
Expert:  Lev replied 11 months ago.

Real estate purchase price was $500,000

If the basis is the same as selling price - your gain is zero.

However - we need to be sure that you correctly identified the ADJUSTED basis.

The original basis (purchase price) is adjusted by adding improvement expenses and subtracting depreciation (that presumably was already claimed as deduction).

Then - you may calculate your estimated gain - which will be taxed as capital gain

, assets $50000,

I assume - these are tangible business assets - correct?

If so - we need to know adjusted basis separately for each asset and separately calculate the gain or loss.

There will be two two types of gain - depreciation recapture will be taxed as ordinary income and the rest of the gain will be taxed as capital gain.

goodwill and intangibles $175000

We need to differentiate section 179 intangible (including goodwill) as

- self-created - that gain will be taxed as ordinary income

- amortizable section 197 intangible (which were previously purchased and amortized) - in this case recaptured amortization will be taxed as ordinary income and the rest of teh gain will be taxed as capital gain.

, accounts receivable $75000

Accounts or notes receivable acquired in the ordinary course of a trade or business for services rendered are noncapital assets - the gain or loss will be treated as ordinary gain or loss.

Customer: replied 11 months ago.
Are deposits to 529 savings plan tax deductible in indiana
Expert:  Lev replied 11 months ago.

Yes - for state income tax purposes and NO for federal income tax purposes.

See additional information in this publication

http://www.in.gov/dor/files/ib98.pdf

Customer: replied 11 months ago.
How much is the tax savings for the state taxes, is it dollar to dollar or a percentage and what is the max dollar amount that Can be put in
Expert:  Lev replied 11 months ago.

That is a CREDIT - not deduction - so the credit is directly applied to state income tax liability - dollar to dollar.

The amount of the credit is the lesser of the following:
• 20% of the amount of all contributions the taxpayer makes to an account(s) of the Indiana College Choice 529 Education Savings Plan during the taxable year;
• The amount of the taxpayer’s adjusted gross income tax liability for the taxable year reduced by the amount of credits allowed under IC 6-3-1 through IC 6-3-7; or
• $1,000.
A taxpayer qualifying for the credit is not entitled to a carryback, carryforward, or refund of any unused credit. The tax credit may not be sold, assigned, or transferred by the taxpayer eligible to claim the credit.

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