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If i have a sale of "good will" in an S-Corporation that was…

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If i have a...

If i have a sale of "good will" in an S-Corporation that was "self created"; i.e. not purchased - is the gain ordinary or capital?

Accountant's Assistant: The Accountant will know how to help. Please tell me more, so we can help you best.

Idea - purchased equipment with cost basis of $5,000. Accumulated tax depreciation is $4,000. We are selling the asset for $7,000. The true value of the asset is approx $3,000. The value of the proceeds above the true asset value is being allocated to good will. Looking to identify the charachter of this gain.

Accountant's Assistant: Is there anything else the Accountant should be aware of?

I believe this is all?

Submitted: 4 months ago.Category: Tax
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11/28/2017
Tax Professional: Lev, Tax Advisor replied 4 months ago
Lev
Lev, Tax Advisor
Category: Tax
Satisfied Customers: 32,697
Experience: Taxes, Immigration, Labor Relations
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The gain realized from the sale on self-created intangibles (including the goodwill) will be treated as ordinary income.

Let me know if you need any help with reporting.

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Tax Professional: Lev, Tax Advisor replied 4 months ago

I appreciate if you take a moment to rate the answer.

Experts are ONLY credited when answers are rated positively.

If you still have any doubts, need clarification - please be sure to ask.I am here to help you with all Social Security / Tax related issues.
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Customer reply replied 4 months ago
i believe the answer is wrong - thanks for trying...
Tax Professional: Lev, Tax Advisor replied 4 months ago

The issue is that the gain realized from the sale of so called self-created intangibles classified as non amortizable section 197 intangible. - will be taxed as ordinary income.

Only a gain realized on amortizable section 197 intangible may be taxed at long term capital gain rates.

I am positive on that determination.

I understand that you expected a different answer...
Sorry.

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