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Lane, Sold a business in 2017 (LLC). The buyer paid 180,000…

Lane,Sold a business in 2017...
Lane,Sold a business in 2017 (LLC). The buyer paid 180,000 of which 162,000 was received after commission. They bought all the equipment and furniture of the restaurant and took over the location. Total book value of the assets was 327,000 (includes 5,000 of capitalized organizational costs) and as of 12/31/17 115,000 of deprecation has been taken.What forms need to be filed with form 1065? How does the sale get allocated to each asset?
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Answered in 7 minutes by:
3/9/2018
Lev
Lev, Tax Advisor
Category: Tax
Satisfied Customers: 32,708
Experience: Taxes, Immigration, Labor Relations
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What forms need to be filed with form 1065?

You will need to report the sale separately for each asset using form 4797.

https://www.irs.gov/pub/irs-pdf/f4797.pdf

How does the sale get allocated to each asset?

The sale of a business usually is not a sale of one asset. Instead, all the assets of the business are sold. Generally, when this occurs, each asset is treated as being sold separately for determining the treatment of gain or loss.

Both the seller and purchaser of a group of assets that makes up a trade or business must use Form 8594 to report such a sale.

So that allocation is generally based on the agreement between the buyer and the seller

https://www.irs.gov/pub/irs-pdf/f8594.pdf

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Customer reply replied 1 month ago
Would the sale price be the 180, 000 or the 162,000. If it is the 180,000 were would the commission get deducted?

The sale price will be 180, 000

commission will be added to the basis - and will be allocated between assets.

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Customer reply replied 1 month ago
How should it be allocated (asset purchase price/total assets)X commission?

First - you will allocate the sale price - $180,000 between assets - and will list that on form 8594 - see above .

Then - you will use the same percentage to allocate commission expenses between assets.

You may use the formula above.

Then - you will have a list of assets and should have a basis for each asset - just adjust the basis by additional sale expenses (in your situation - commissions)

After that - you will have separately for each asset - sale price and adjusted basis - and will be able to report the sale.

Lev
Lev, Tax Advisor
Category: Tax
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Customer reply replied 1 month ago
Thank you. I will have follow up questions and I will request you.
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