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Mark D
Mark D, Enrolled Agent
Category: Tax
Satisfied Customers: 1250
Experience:  MBA, EA, Specializing in Business and Individual Tax Returns and Issues
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I have a client that purchased a business about 13 years

Customer Question

I have a client that purchased a business about 13 years ago. He paid 100K for the business and then bought his own equipment which was depreciated over the years. He has now sold the business for $100K but getting installment payments and only received $20K for 2015. Did not sell assets but business only. Does he have to count the $20K as total income or can we offset with the cost basis?
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Submitted: 9 months ago.
Category: Tax
Expert:  Mark D replied 9 months ago.

Hello, you will need a cost allocation of the total purchase price. Both the buyer and seller must report this on Form 8594 and they must match. If you client sold intangible assets only, you will need to go back and see what amount of his purchase price was allocated towards these intangibles. Should be on the amortization schedule. The gain would be the sales price less the adjusted basis. To report the gain under the installment method, use Form 6252. You would only report gain on principal payments received that year. If to the taxpayer's advantage, you may also elect to recognize the gain in full in the first year. Does this help?

Expert:  Mark D replied 9 months ago.

Did that clarify my answer? If so please rate as that is how I am paid.

Expert:  Mark D replied 9 months ago.

Hello, did that answer your question? Please rate if so.

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