Sale of business (Sch C)

[ILLMAS]

Sch C business was sold, no assets were transferred (didn't have any), basically the name was sold and the contracts of clients, my questions are the following:

• Does one need to notify the IRS business XYZ was sold, or the fact that it appears on form 6252 (installment sale) is enough.
• Also what would be the proper title for the description of property sold, Sale of goodwill or Assets of XYZ?

Thanks

MAS

[kcjenkins]

Filing the 6252 is the notification. And I'd go with "Sale of Business Name & Goodwill".

[Jack from Ohio]

Filing the 6252 is the notification. And I'd go with "Sale of Business Name & Goodwill".

Agree.

[Terry D EA]

Me Too

[michaelmars]

me three

[ILLMAS]

How does the IRS see Goodwill? People can play with goodwill allocation.

[Jack from Ohio]

How does the IRS see Goodwill? People can play with goodwill allocation.

It is negotiated between buyer and seller and is whatever it is.

[jshtax]

What about form 8594? I have seen it used before.

[kcjenkins]

When a business has no, or nearly no physical assets, what is sold MUST therefore be Goodwill.

[SFA]

Even in this case, we would include Form 8594 with the return.

[taxxcpa]

I have a client who owns an S-Corp that he is about to sell. There are all kinds of complications. Gain due to recaptured depreciation cannot be reported on the installment method. It is reported in the year of sale even if no installment payments have been received.

There could be some depreciation not subject to tax as ordinary income--if the FMV of the asset is less than the accumulated depreciation. Older assets aren't likely to be affected, but newer ones could be.

For real estate,

Sec 1250 Property: Recapture on the depreciation you could have claimed using SL depreciation is taxed at 25%. Recapture of depreciation in excess of this is taxed at 15%. (The Tax book, page 6-14).

Determining what is capital gain and what is ordinary income is a difficult thing to do.