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Stephen G.
Stephen G., Sr Income Tax Expert
Category: Tax
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Experience:  Extensive Experience with Tax, Financial & Estate Issues
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My client has owned an S corp past 10 years and sold

Customer Question

My client has owned an S corp for the past 10 years and sold it last year. The deal was 60k assets and 300k goodwill.
Depreciation for leasehold improvement has been charged only for three years. The past 5 years depreciation has never been calculated.
my questions
1. can I calculate depreciation expense for the past 5 years and adjust on 2015 statements?
2. how can I put on the 1040 the sale of the s corpo?
Submitted: 7 months ago.
Category: Tax
Expert:  Stephen G. replied 7 months ago.
In order to get a tax deduction on the S-Corp for the unclaimed depreciation you have to file Form 3115.What was sold? Did the S-Corp sell it's assets or did the owner sell the stock of the S-Corp?If the S-Corp sold it's assets, the S-Corp reports the sale and it will be passed through to the owner of the S-Corp via the K-1. Then you would do a liquidation of the S-Corp.One of those 2 ways is the only way the sale gets reported on the 1040; ie directly through the sale of the S-Corp stock, which doesn't sound like that's what was done, or through the pass-through via the K-1 if the S-Corp sold it's assets.Steve G.
Customer: replied 7 months ago.
Thanks Steven,
The owner sold the assets of the S corporation.
The deal says 60 k assets and 300 k goodwill.
Customer: replied 7 months ago.
How can I report the sale ( 60 k assets and 300 goodwill) on forms 8594 and 4797?
Expert:  Stephen G. replied 7 months ago.
Well, the 8594 is prepared by both the Seller and the Buyer and should agree, so you might want to discuss with the buyer's accountant to see that it's consistent.There's no real property, so the 1120-S Form 4797 would be pretty straightforward. The equipment being 1245 property would be reported in Part III and the Goodwill on the 1120-S Schedule D as a long-term capital gain.
Customer: replied 7 months ago.
Ok
60 k for asset will be reported on s form part III of 4797.Good will 300k will be reported on schedule D. I think partII of schedule D yes?
Expert:  Stephen G. replied 7 months ago.
Yes re Schedule D, but you need to use the sub-schedule first Form 8949
Customer: replied 7 months ago.
the problem now is we have only one sale price which is 60k ( for all assets and goodwill). schedule 8949 requires us to list each assets selling price. If we don't have a selling price for each asset but if we have one single price for all assets , how can we list them in 8949?
Customer: replied 7 months ago.
The sale is for assets $60k
and for goodwill $300k.
schedule 8949 requires us to list each assets individually. we have a lump sum amount.for assets which is $60k. how can I list them in 8949?
Expert:  Stephen G. replied 7 months ago.
The 8949 is not for those assets; those go on the 4797 Part III; you can group them together if they are all 1245 property. You didn't specify except that you had depreciation on them? So 1245 property.Use the 8949 for the 300K of Goodwill, that's it.Be more specific with what the exact purchase/sale allocation was if you need more assistance.
Customer: replied 7 months ago.
Thank you Steve
The sale agreement is $360k ( $60 for assets and $300k for goodwill).
All assets has never been depreciated. so I will use 3115 for unclaimed depreciation
Assets will be reported 4797 part III I will group them together.
goodwill will be reported on part II of 8949
what else remaining?
Expert:  Stephen G. replied 7 months ago.
You fill have to liquidate the S-Corp; file 966 with the IRS; and report any gain or loss on the S-Corp distributions compared to the owner(s)' tax basis in the S-Corp on the owner(s)' 1040 whenever the final liquidation proceeds were (are) distributed.
Expert:  Stephen G. replied 7 months ago.
Just checking in..................I see that you've had a chance to read my response, do you have any follow-up questions?If not, please remember to rate my response as that is the only way we receive credit for our share of any payment that you have already made.Thanks very much,Steve G.
Expert:  Stephen G. replied 7 months ago.
Just checking in..................I see that you've had a chance to read my response, do you have any follow-up questions?If not, please remember to rate my response as that is the only way we receive credit for our share of any payment that you have already made.Thanks very much,Steve G.

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