Tax

Have a Tax Question? Ask a Tax Expert

Ask an Expert,
Get an Answer ASAP!

Tax
This answer was rated:

Please elaborate steps to take in the sale of a business corporation.

How, when and where to...
Please elaborate steps to take in the sale of a business corporation. How, when and where to report the sale proceeds. Private corporation and only one stock holfder.
Show More
Show Less
Ask Your Own Tax Question
Answered in 13 minutes by:
5/7/2012
jgordosea
jgordosea, Enrolled Agent
Category: Tax
Satisfied Customers: 3,161
Experience: I've prepared all types of taxes since 1987.
Verified

Greetings,

 

1. Is this a sale of the assets?

 

Or a sale of the stock?

 

If background is needed on stock sale vs asset sale please see the article at http://www.whafh.com/modules/publication/?action=view&id=38

 

2. Is there an S election in place for the corporation?

 

3. Did the owner contribute assets or only cash to the corporation?

 

4. Will the corporation distribute assets/liabilities or only cash on dissolution (if applicable)?

 

5. Will the proceeds from the sale all be received in the same tax year?

 

These items influence when, where and how the sale is reported.

Thank you.

 

 

Ask Your Own Tax Question
Customer reply replied 5 years ago
This is a sale of asset, basically a chicken store with all the frying equipment, freezers and
inventory, Besides there is some consideration fo the daily sales the business is taking in and the number of years the business is running. This is a C Corp. The corporation will not be disolved and will continue functioning because it will be buying another business.
The proceeds will be received in the same tax year (2012).

Hello again,

 

When the corporation sells the assets, those sales are reported in the year the proceeds are received.

Most asset sales will be reported on Form 4797. See the instructions at http://www.irs.gov/pub/irs-pdf/i4797.pdf for a table of what section of Form 4797 to use for particular assets. Of course, most tax software will place the items in the proper sections based on inputs of sales price and holding period.

Gain or loss on the sale will be reported in the corporate tax return.

 

Both the buyer and the seller of business assets must report to the IRS the allocation of the sales price among the business assets on Form 8594 (Asset Acquisition Statement Under Section 1060) which will be attached to the buyer and seller's federal tax return for the year of the sale.

See http://www.irs.gov/instructions/i8594/ch01.html#d0e60 for the classes of assets that must be allocated part of the purchase price. Preferably the allocation amounts are agreed between the buyer and seller and specified in the purchase agreement.

The "consideration fo the daily sales the business is taking in and the number of years the business is running" is at least partly allocated to Class VII assets (in tax terminology- goodwill and going concern value).

 

Those are the main required forms for a corporation selling assets that will continue in existence.

 

Although it is much more technically demanding to qualify as an exchange rather than a sale and the later purchase of assets used in the trade or business, there may be use for Form 8824 to allow gain (and tax on the gain) to be defered into the replacement assets.

An intermediary is generally required to facilitate the exchange and prevent the seller from having access to the proceeds until the exchange is accomplished.

See http://www.irs.gov/instructions/i8824/ch01.html#d0e81

"Generally, if you exchange business or investment property solely for business or investment property of a like kind, section 1031 provides that no gain or loss is recognized. If, as part of the exchange, you also receive other (not like-kind) property or money, gain is recognized to the extent of the other property and money received, but a loss is not recognized."

This may or may not be feasible or applicable to the situation; but when selling one business and buying another it can represent significant current tax saving.

 

New Jersey does require a purchaser of business assets to file Form C-9600

NOTIFICATION OF SALE, TRANSFER, OR ASSIGNMENT IN BULK but sales tax is likely not required as this type of sale is probably exempt as an occasional or an isolated sale. This is quite fact sensitive and should be verified with a local practitioner to sure the rules are applied properly to the particular facts. See www.state.nj.us/treasury/taxation/pdf/other_forms/misc/c9600.pdf

 

Those are the basics of a corporation selling assets to help inform you of the general rules. Please ask if you need clarification or start another thread if you wish to discuss a topic (such as like kind exchange).

 

Thank you.

 

 

 

 

 

 

 

 

 

 

 

 

 

Ask Your Own Tax Question
Customer reply replied 5 years ago
In the process of reviewing and summarizing it, please wait before I send you that and accept your answer.

Thank you.

Take as long as you need and also know that you can come back even after accepting for reference or to restart the discussion, if needed.

Best regards.

jgordosea
jgordosea, Enrolled Agent
Category: Tax
Satisfied Customers: 3,161
Experience: I've prepared all types of taxes since 1987.
Verified
jgordosea and 87 other Tax Specialists are ready to help you
Ask your own question now
Customer reply replied 5 years ago
Here is what I understand ;-

Sale of asset to report on form 4797 - While filling out this form the sale price will be
identified as sale of stock.....?
For the classification - Form 8594 is required which will provide a breakdown of the purchase price item wise. Now this will be for both - Seller and Purchase or only seller will
fill out.
This is in case the business has to continue, if we wish to close the corporation, then we can mark it as a final return. Now what action the purchase has to take.
Customer reply replied 5 years ago
Thanks

Hello again,

 

Sale of asset to report on form 4797 - While filling out this form the sale price will be
identified as sale of stock.....?

Since this is an asset sale (and not a stock sale) each asset, or group, will be on the From 4797. Usually the depreciation schedule is used and the amount allocated in total for equipment sold is further allocated to the various assets based on the initial cost of the asset. Most tax software will allow the sales price to be entered in the asset schedule and will carry the sale to the Form 4797.

 


For the classification - Form 8594 is required which will provide a breakdown of the purchase price item wise. Now this will be for both - Seller and Purchase or only seller will fill out.

Both the buyer and seller must file this form. Preferably the amounts are agreed upon as part of the purchase negotiation and the form, or a similar schedule, is part of the agreement.

 

This is in case the business has to continue, if we wish to close the corporation, then we can mark it as a final return.

Correct.

 

Now what action the purchase has to take.

If an intermediary is not used to defer gain via an exchange, then the purchase of assets will be just like when the corporation buys any asset (regardless of the prior sale of other assets). The new asset will be recorded and depreciation will begin when placed in service by the corporation.

 

Please ask again if you have more questions.

Thank you.

Ask Your Own Tax Question
Ask jgordosea Your Own Question
jgordosea
jgordosea
jgordosea, Enrolled Agent
Category: Tax
Satisfied Customers: 3,161
3,161 Satisfied Customers
Experience: I've prepared all types of taxes since 1987.

jgordosea 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

4,310 satisfied customers

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

Robin D.

Robin D.

Senior Tax Advisor 4

13,695 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

3,161 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
My question is about depreciation for rental property. My
Hello. My question is about depreciation for rental property. My rental property had no income during one year. In this case, since there was no income, I do not need to claim depreciation for that sa… read more
Fred Rook
Fred Rook
Corporate Controller
BSBA
31 satisfied customers
I have a question on Form 6252 Installment sale on Property.
Hi I have a question on Form 6252 Installment sale on Property … read more
Barbara
Barbara
Enrolled Agent, Paralegal
3,444 satisfied customers
REGARDING THE FEDERAL TAX LAW INTHE US. IF ONE RECEIVES
REGARDING THE FEDERAL TAX LAW INTHE US. IF ONE RECEIVES ALIMONY PAYMENTS, WHAT CAN QUALIFY AS TO ***** REDUCE THE TAX ON THE ALIMONY RECEIVED ? CAN BUSINESS LOSES BE CARRIED OVER TO REDUCE THE TAX ON … read more
Robin D.
Robin D.
Senior Tax Advisor 4
Vocational, Technical or Trade School
13,695 satisfied customers
How to report the sale of a property outside US? How to
How to report the sale of a property outside US? How to claim the taxes paid abroad on the profit made by selling property overseas?… read more
NPVAdvisor
NPVAdvisor
CFP Licensee and Practitioner
Master's Degree
180 satisfied customers
Sold an office bldg. Used cost segregation depreciation
sold an office bldg. Used cost segregation depreciation method. Does this deprecation need to be deducted from the cost basis to determine tax impact? … read more
emc011075
emc011075
Senior Tax Specialist
Bachelor's Degree
16 satisfied customers
Disposition of Rental Property. Rental property: Gross sale
Disposition of Rental Property.Rental property : Gross sale price: $600K Cost or Other Basis plus Selling Expenses: $300K Depreciation allowed or allowable: $100K (Form 4797 line 22)Adjustment: $300K … read more
emc011075
emc011075
Senior Tax Specialist
Bachelor's Degree
16 satisfied customers
Sell of property tax liability. Ca. Bought home 25 yrs ago
bought home 400,000 selling 2.5 mil. Invested 500,000 owe 800,000… read more
Richard
Richard
Tax Attorney
Doctoral Degree
4,310 satisfied customers
I am preparing a corporate tax return. The company is a
I am preparing a corporate tax return. The company is a payroll company based in NJ but almost all of the clients are in NYC. Is the income generated from NY clients require a NY S corporate tax retur… read more
NPVAdvisor
NPVAdvisor
CFP Licensee and Practitioner
Master's Degree
180 satisfied customers
What is the percent of federal tax on an estate sale of
what is the percent of federal tax on an estate sale of property? … read more
taxmanrog
taxmanrog
Master\u0027s Degree
697 satisfied customers
When does the Florida sales tax liability due to the DOR'
When does the Florida sales tax liability due to the DOR' invoice & delivery or title registration with the county tag office? … read more
abci168
abci168
Principal
27 satisfied customers
Company A transferred assets and liabilities to a newly
Company A transferred assets and liabilities to a newly formed Company B … read more
LEV
LEV
Retired
Bachelor's Degree
14,896 satisfied customers
For non tax reasons, i want to transfer assets, non property
For non tax reasons, i want to transfer assets, non property assets, non 1231, 1245 assets, that are currently in an S corporation to a new S corporation. … read more
PDtax
PDtax
Owner
Master\u0027s Degree
1 satisfied customers
I didn't claim depreciation on a rental property for 8
I didn't claim depreciation on a rental property for 8 years. I'm about to sell the property. How many years of the past annual depreciation can I claim? … read more
NPVAdvisor
NPVAdvisor
CFP Licensee and Practitioner
Master's Degree
180 satisfied customers
Is there an exemption for the Philadelphia sales tax? For
Is there an exemption for the Philadelphia sales tax? For example a business enterprise requires a service provider services. Such as pest control service for rental properties? Or, accounting service… read more
abci168
abci168
Principal
27 satisfied customers
What is the Federal tax % on 20,800 for trailer sale?
What is the Federal tax % on 20,800.00? My daughter is selling her house trailer for 20,800.00. How much does she need to pay in Federal and Colorado taxes?… read more
Barbara
Barbara
Enrolled Agent, Paralegal
3,444 satisfied customers
If I file exempt on federal taxes for the whole year but
if I file exempt on federal taxes for the whole year but filing head of household and dependent 13 years old...and paying my student loan 169 dollars a month … read more
Mark Taylor
Mark Taylor
Certified Public Accountant
Masters
2,215 satisfied customers
I filed my 2016 federal taxes and attached IRS Form 5329 and
I filed my 2016 federal taxes and attached IRS Form 5329 and asked for a waiver on the tax on an RMD. We received the RMD (in 2017) late through no fault of our own but because of the financial compan… read more
NPVAdvisor
NPVAdvisor
CFP Licensee and Practitioner
Master's Degree
180 satisfied customers
This tax question regards depreciation, cost basis and asset
Hello, this tax question regards ***** ***** basis and asset reporting when you tear down one vacation rental property and replace it with another on the same lot. The original vacation cottage still … read more
ABC Accounting Group
ABC Accounting Group
Bachelor\u0027s Degree
682 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