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USTaxAdvising
USTaxAdvising, CPA
Category: Tax
Satisfied Customers: 1237
Experience:  US Taxation specialist.
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I have a client who did the following and i'm not sure of

Customer Question

"I have a client who did the following and i'm not sure of the accounting due to the lack of paperwork and due diligence on their part. It was a small retail grocery store....
- bought a business - inventory 50K, total purchase price 120K in 2015..."
-sold business in same year for $103,000 (50K of it was inventory)
- the new owners continued to use my clients bank account and tax id until March 2016.
Can i record the sale in 2015 if the new owners were using my client's information after the sale. the sale has not been recorded with the state until 2016 also.
Submitted: 7 months ago.
Category: Tax
Expert:  USTaxAdvising replied 7 months ago.
Hello,If the cash was received in 2015 then it would be a 2015 sale. The fact that the new owners were using your client's information, or that the sale had not been recorded by the state until 2016 is somewhat not relevant to when the sale would be recognized for US federal income tax purposes.For US federal and state income tax purposes the sale is considered to have occurred when the cash is received (i.e. economic performance).I trust this provides the clarity you were looking for. Please let me know if you have any follow up questions and I will get back to you as soon asm I can. Best regards,
Customer: replied 7 months ago.
so the business was bought and sold in the same year. I can use a bit of assistance recording goodwill/ etc. additional paid in capital by the owners. what happens to all the money they put into the business before they sold it? company had a loss plus the owners lost everything they put into itThank you

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