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The sale of a business - how would you list it and how do…

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The sale of a business...
The sale of a business - how would you list it and how do you determine what would be considered income if any?
Submitted: 3 months ago.Category: Tax
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3/27/2018
Tax Professional: Lev, Tax Advisor replied 3 months ago
Lev
Lev, Tax Advisor
Category: Tax
Satisfied Customers: 33,111
Experience: Taxes, Immigration, Labor Relations
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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.

The buyer and seller should each attach Form 8594 -

to their federal income tax returns for the year in which the sale occurred.
They will list all assets and allocate the price to each asset.

.

The seller will report teh sale of each separate asset - and depending on unrecoverable basis, will calculate the gain - separately for each asset.

and after that will combine all gains and all losses realized on separate assets.

That will be realized gain on teh sale of teh entire business.

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Customer reply replied 3 months ago
if the value the sale is based on assets - either tangible or intangible - the value is somewhat subjective - how would you truly determine net gain or loss either - for the seller who will report the income as profit or loss or the buyer who would like to deduct that cost of doing business?
Tax Professional: Lev, Tax Advisor replied 3 months ago

The allocation between assets is based on the agreement between the buyer and the seller.

That is partially the purpose of form 8594 to represent that allocation.

The total sale price is also subjective and based on the agreement.

Whatever - both - the buyer and the seller - agreed - that will be considered true fair market value of the business and for each specified asset included into that sale.

You may order an apprasal if you want to have a professional opinion before negotiating.

The buyer will start depreciation/amortization of these assets based on allocation from form 8594.

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Tax Professional: Lev, Tax Advisor replied 3 months ago
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