Tax

Have a Tax Question? Ask a Tax Expert

Ask an Expert,
Get an Answer ASAP!

Tax

I am selling a small business (sole proprietorship)with goodwill

Customer Question
gains of 225,000.00. Can I...
I am selling a small business (sole proprietorship)with goodwill gains of 225,000.00. Can I offset these gains by taking losses on stocks that I own?
Submitted: 7 years ago.Category: Tax
Show More
Show Less
Ask Your Own Tax Question
Answered in 7 minutes by:
8/21/2010
Tax Professional: Merlo, Accountant replied 7 years ago
Merlo
Merlo, Accountant
Category: Tax
Satisfied Customers: 9,783
Experience: 25+ years tax consulting. Specializing in returns for US citizens living abroad
Verified

Hello JA Customer,

 

Income from the sale of business goodwill is treated as ordinary income and is subject to ordinary income tax rates. Losses from the sale of stocks can be used to offset any income you have from capital gains, but those losses can only offset ordinary income up to a maximum of $3,000 each year.

 

If this was helpful please press the Accept button. It is the only way we receive any credit for helping with these questions.

 

Thank you

 

 

Merlo
Merlo, Accountant
Category: Tax
Satisfied Customers: 9,783
Experience: 25+ years tax consulting. Specializing in returns for US citizens living abroad
Verified
Merlo and 87 other Tax Specialists are ready to help you
Ask your own question now
Customer reply replied 7 years ago

It seems that this sight does not jive with your answer

 

http://www.taxprophet.com/archives/hot/may99.htm

 

 

Can you explain your answer in more detail on why Goodwill is not a capital gain?

 

Tom

Tax Professional: Merlo, Accountant replied 7 years ago

Hello again Tom,

 

From the seller's perspective, personal goodwill is subject to long-term capital gains treatment. In contrast, any amount allocated to the sale of business goodwill is subject to ordinary income treatment. Thus, the seller of personal goodwill will receive a greater tax benefit for the amount allocated to personal goodwill. In a sale of stock rather than assets, there will be no difference in tax treatment, both personal and business goodwill being long-term capital gains.

 

http://webcache.googleusercontent.com/search?q=cache:4uBuWxnDZdQJ:localtechwire.com/business/local_tech_wire/opinion/story/2525773/+irs+sale+of+goodwill&cd=4&hl=en&ct=clnk&gl=us

 

If the goodwill can be treated as personal, then this could be treated as a capital gain. Refer to the above article for more details.

 



Edited by Merlo on 8/25/2010 at 9:36 PM EST
Ask Your Own Tax Question
Customer reply replied 7 years ago

because this is a sole propietorship, and not a c corp, how could it be treated any other way than LTCG? There is no line in form 8594 that says personal or business goodwill.

 

It is a class VII asset, that flows directly to Schedule D section 2 Long term capital gains. Am I right. And if I am then I could take other stock losses and mitigate the LTCG.

 

Is that correct?

Tax Professional: Merlo, Accountant replied 7 years ago

Hello again tom,

 

I am going to put your question back on the open list in the forum to see if one of the other tax experts here is more familiar with how to report this being a sole proprietorship. If someone else posts a response, you will receive an email notification.

 

Thank you for your patience.

 

 

 

Ask Your Own Tax Question
Customer reply replied 7 years ago

Any luck with confirming the anwer?

 

We are closing tomorrow and this is a big deal to me $40,000 in tax difference, so if you find something please let me know asap.

 

Tom

Tax Professional: Merlo, Accountant replied 7 years ago

Hello Tom,

 

I did put your question back on the board for the other experts in the forum to review. I see that no one else has responded but unfortunately I have no control or any way of knowing if any of the other experts here feel they have enough hands on experience with this particular issue to be of help.

 

I can only tell you that if someone has an answer to your question they will post a response and you would receive an email notification that a response has been posted. But there is no way to know if you will get an answer by tomorrow or even at all.

 

 

Ask Your Own Tax Question
Customer reply replied 7 years ago

Hey Merlo,

 

If no-one feels comfortable answering the question then maybe I should just get my $30.00 back and we call this square.

 

I do believe that the gain on Goodwill is LTCG, and can be offset but other stock losses. Please not that this is a SP, so everything flows to my personal Scedule D.

 

If you have anything other than that let me know, or give me my mony back.

 

Tom

Tax Professional: Merlo, Accountant replied 7 years ago

I will send through a request to our customer service department to issue you a refund, as I have no direct control over the money or deposits that are made to this website.

 

 

Ask Your Own Tax Question
Ask Merlo Your Own Question
Merlo
Merlo
Merlo, Accountant
Category: Tax
Satisfied Customers: 9,783
9,783 Satisfied Customers
Experience: 25+ years tax consulting. Specializing in returns for US citizens living abroad

Merlo is online now

A new question is answered every 9 seconds

How JustAnswer works:

  • Ask an ExpertExperts are full of valuable knowledge and are ready to help with any question. Credentials confirmed by a Fortune 500 verification firm.
  • Get a Professional AnswerVia email, text message, or notification as you wait on our site. Ask follow up questions if you need to.
  • 100% Satisfaction GuaranteeRate the answer you receive.

JustAnswer in the News:

Ask-a-doc Web sites: If you've got a quick question, you can try to get an answer from sites that say they have various specialists on hand to give quick answers... Justanswer.com.
JustAnswer.com...has seen a spike since October in legal questions from readers about layoffs, unemployment and severance.
Web sites like justanswer.com/legal
...leave nothing to chance.
Traffic on JustAnswer rose 14 percent...and had nearly 400,000 page views in 30 days...inquiries related to stress, high blood pressure, drinking and heart pain jumped 33 percent.
Tory Johnson, GMA Workplace Contributor, discusses work-from-home jobs, such as JustAnswer in which verified Experts answer people’s questions.
I will tell you that...the things you have to go through to be an Expert are quite rigorous.

What Customers are Saying:

I really was impressed with the prompt response. Your expert was not only a tax expert, but a people expert!!! Her genuine and caring attitude came across in her response...

T.G.WMatteson, IL

I WON!!! I just wanted you to know that your original answer gave me the courage and confidence to go into yesterday's audit ready to fight.

BonnieChesnee, SC

Great service. Answered my complex tax question in detail and provided a lot of additional useful information for my specific situation.

JohnMinneapolis, MN

Excellent information, very quick reply. The experts really take the time to address your questions, it is well worth the fee, for the peace of mind they can provide you with.

OrvilleHesperia, California

Wonderful service, prompt, efficient, and accurate. Couldn't have asked for more. I cannot thank you enough for your help.

Mary C.Freshfield, Liverpool, UK

This expert is wonderful. They truly know what they are talking about, and they actually care about you. They really helped put my nerves at ease. Thank you so much!!!!

AlexLos Angeles, CA

Thank you for all your help. It is nice to know that this service is here for people like myself, who need answers fast and are not sure who to consult.

GPHesperia, CA

< Previous | Next >

Meet the Experts:

Wallstreet Esq.

Wallstreet Esq.

Tax Attorney

586 satisfied customers

10 years experience

Mark D

Mark D

Enrolled Agent

1,300 satisfied customers

MBA, EA, Specializing in Business and Individual Tax Returns and Issues

Richard

Richard

Tax Attorney

4,338 satisfied customers

29 years of experience as a tax, real estate, and business attorney.

Robin D.

Robin D.

Senior Tax Advisor 4

13,980 satisfied customers

15years with H & R Block. Divisional leader, Instructor

Megan C

Megan C

Certified Public Accountant (CPA)

8,651 satisfied customers

Licensed CPA, CFE, CMA, CGMA who teaches accounting courses at Master's Level

jgordosea

jgordosea

Enrolled Agent

2,885 satisfied customers

I've prepared all types of taxes since 1987.

R. Klein, EA

R. Klein, EA

Enrolled Agent

1,839 satisfied customers

Over 20 Years experience

< Previous | Next >

Related Tax Questions
What form do I use to send realestate capital gains payment.
What form do I use to send realestate capital gains payment … read more
Tax.appeal.168
Tax.appeal.168
Principal
13 satisfied customers
If I don't have any ordinary income, only social security
if I don't have any ordinary income, only social security and have a long term capital gain from the sale of a business, how would it be treated for tax purposes? … read more
Chad EA, CFP ®
Chad EA, CFP ®
IRS Enrolled Agent, CFP(R),
Master\u0027s Degree
1,068 satisfied customers
If I don't have any ordinary income, only social security
Second opinion] if I don't have any ordinary income, only social security and have a long term capital gain from the sale of a business, how would it be treated for tax purposes? … read more
Lane
Lane
JD, MBA, CFP, CRPS
Doctoral Degree
37 satisfied customers
I want to sell stock which will give me a term capital gain.
I want to sell stock which will give me a long term capital gain. The difference between the cost basis and the sale is $131, 200. Is this the amount that would be listed on line 13 of the 1040 tax re… read more
Barbara
Barbara
Enrolled Agent, Paralegal
3,791 satisfied customers
On form 1041, capital gains have to be taxed at the estate
On form 1041, capital gains have to be taxed at the estate level, correct? No distribution deduction may be taken?… read more
Lane
Lane
JD, MBA, CFP, CRPS
Doctoral Degree
37 satisfied customers
What are the turm capital gains tax on properties that are
what are the long turm capital gains tax on properties that are in germany? … read more
Robin D.
Robin D.
Senior Tax Advisor 4
Vocational, Technical or Trade School
13,980 satisfied customers
On Form 706 Schedule D, if the proceeds were paid directly
On Form 706 Schedule D, if the proceeds were paid directly to a funeral home to pay for funeral expenses should the face value of the policy be included on this schedule? Also should the funeral expen… read more
Lane
Lane
JD, MBA, CFP, CRPS
Doctoral Degree
37 satisfied customers
I'm working to understand capital gains tax for California
I'm working to understand capital gains tax for California property purchased 4 years ago. It's a primary residence, purchased 4 years ago for $385k with $285k principle outstanding. Expected sale price of $630k … read more
Tax.appeal.168
Tax.appeal.168
Principal
13 satisfied customers
I'm canadian who want to understand capital gains tax rate.
Hi, i'm canadian who want to understand capital gains tax rate.I have a rental house that i bought at 500K. I sold it after 9 yrs at 1100K. With the money, i bought a new house (will be my primary res… read more
Barbara
Barbara
Enrolled Agent, Paralegal
3,791 satisfied customers
I have bitcoin and I want to avoid the capital gains tax and
Hi I have bitcoin and I want to avoid the capital gains tax and dont want it to be ordinary income what should I Do … read more
Chad EA, CFP ®
Chad EA, CFP ®
IRS Enrolled Agent, CFP(R),
Master\u0027s Degree
1,068 satisfied customers
What are the taxes rates 2016 for term gains in irrevocable
what are the taxes rates 2016 for long term gains in irrevocable trusts … read more
Chad EA, CFP ®
Chad EA, CFP ®
IRS Enrolled Agent, CFP(R),
Master\u0027s Degree
1,068 satisfied customers
What is the taxable capital gain for each 50% owner
What is the taxable capital gain for each 50% owner (divorced couple) on a 1031 Exchange property where only one owner meets the 2 of 5 years occupancy test and one of the 50% owners is now remarried?… read more
Chad EA, CFP ®
Chad EA, CFP ®
IRS Enrolled Agent, CFP(R),
Master\u0027s Degree
1,068 satisfied customers
Are you familiar with Capital Gain taxes on rental property?
Are you familiar with Capital Gain taxes on rental property? … read more
Lev
Lev
Retired
Bachelor\u0027s Degree Equivalent
25,341 satisfied customers
I have a question regarding the ordinary income tax. If the
Hello, I have a question regarding the ordinary income tax. If the ordinary income tax due is negative does that apply anywhere? This pertains to the sale of an S corp .business. … read more
Robin D.
Robin D.
Senior Tax Advisor 4
Vocational, Technical or Trade School
13,980 satisfied customers
Is 1120-S K1 non-passive ordinary income also taxable to
Is 1120-S K1 non-passive ordinary income also taxable to self-employment tax? … read more
Barbara
Barbara
Enrolled Agent, Paralegal
3,791 satisfied customers
Estate capital gains tax rate for 61, single, unable to
estate capital gains tax rate for 61, single, unable to work, is claimed as a dependent form sister,only income collects $500 month stipend from gov., which pays for health insurance and meds. is gett… read more
emc011075
emc011075
Tax advisor and Enrolled Agent
Bachelor\u0027s Degree
2,739 satisfied customers
An S Corporation is selling its assets under an Asset
An S Corporation is selling its assets under an Asset Purchase Agreement. The 2 stockholders materially participate in the operation of the business. The business provides credit card processing softw… read more
Lane
Lane
JD, MBA, CFP, CRPS
Doctoral Degree
37 satisfied customers
Second opinion] Has the tax rate in Peru on capital gains
Second opinion] Has the tax rate in Peru on capital gains for non residents recently been changed? I heard it is now 5% and no longer 30%.… read more
Lane
Lane
JD, MBA, CFP, CRPS
Doctoral Degree
37 satisfied customers
Disclaimer: Information in questions, answers, and other posts on this site ("Posts") comes from individual users, not JustAnswer; JustAnswer is not responsible for Posts. Posts are for general information, are not intended to substitute for informed professional advice (medical, legal, veterinary, financial, etc.), or to establish a professional-client relationship. The site and services are provided "as is" with no warranty or representations by JustAnswer regarding the qualifications of Experts. To see what credentials have been verified by a third-party service, please click on the "Verified" symbol in some Experts' profiles. JustAnswer is not intended or designed for EMERGENCY questions which should be directed immediately by telephone or in-person to qualified professionals.

Disclaimer: Information in questions, answers, and other posts on this site ("Posts") comes from individual users, not JustAnswer; JustAnswer is not responsible for Posts. Posts are for general information, are not intended to substitute for informed professional advice (medical, legal, veterinary, financial, etc.), or to establish a professional-client relationship. The site and services are provided "as is" with no warranty or representations by JustAnswer regarding the qualifications of Experts. To see what credentials have been verified by a third-party service, please click on the "Verified" symbol in some Experts' profiles. JustAnswer is not intended or designed for EMERGENCY questions which should be directed immediately by telephone or in-person to qualified professionals.

Show MoreShow Less

Ask Your Question

x