Sold my business

[Possi]

Hey Y'all!

I'm still here, but I sold my business last September.

I'll be working for the new owners for a few more years. 

The sale was a sale of stock, and they will pay me installments with interest, in case anyone was wondering how that goes. He could have purchased my client list and depreciated it himself, but instead chose to make it a stock purchase so I'd get the better tax advantage. 

I think I can simply report the stock sale on the Sch D and interest on the Sch B each year without having to do the "installment sale" form 6252. Correct me if I'm wrong. 

Not owning the business was an immediate weight off my shoulders. I'm glad I trusted God on this one. 

Donna

 

 

[Lion EA]

Congratulations & God Bless You!     

[Gail in Virginia]

I think that it depends on how you are reporting it.  If you report the entire sale and profit this year, then you can report the interest directly on the Sch B and there would be no reason to do the 6252.  I am really not sure you can report the sale of stock as an installment sale - I would want to look that up before I expressed an opinion. 

[Lynn EA USTCP in Louisiana]

Sales of privately held stock may be reported by the installment method (I don't have a cite handy but many years ago had a client in similar circumstances).

[Lee B]

4 minutes ago, Lynn EA USTCP in Louisiana said:

Sales of privately held stock may be reported by the installment method (I don't have a cite handy but many years ago had a client in similar circumstances).

Yes there was thread discussing this, last month I think.

[Possi]

24 minutes ago, cbslee said:

Yes there was thread discussing this, last month I think.

I'm looking for it now. Thanks! 

 

[jklcpa]

Installment sale on 6252 that will flow to Sch D unless you elect out by reporting entire transaction on D in 2021. Interest goes on Sch B and purchaser should issue you a 1099INT each year it exceeds threshold.

Edited January 24, 2022 by jklcpa

[jklcpa]

If the sale price includes future payments that are contingent on earnings, you might want to read the following article:

https://www.cpajournal.com/2020/06/16/accounting-for-sales-with-contingent-obligations/

 

[Possi]

1 hour ago, jklcpa said:

Installment sale on 6252 that will flow to Sch D unless you elect out by reporting entire transaction on D in 2021. Interest goes on Sch B and purchaser should issue you a 1099INT each year it exceeds threshold.

The article was helpful, but almost over my head. The sale isn't contingent on income. I can take the money and run if I want. But, I want to work a few more years. 

If I stay and pull in a specified amount of gross receipts cumulatively, over 3 or four years, (as long as it takes me to reach that goal, but within 4 years) I will get a bonus payment after 4 years. As I read the article, this is not a contingency, so those rules don't apply.

I think it's in my best interest to do the 6252, and not take the whole hit on one tax return. That's what you mean by "reporting the entire transaction on D in 2021," right? I just hope LTCG rates don't go up in the next few years. 

THANK YOU, JUDY! 

[jklcpa]

49 minutes ago, Possi said:

I think it's in my best interest to do the 6252, and not take the whole hit on one tax return. That's what you mean by "reporting the entire transaction on D in 2021," right?

 Yes, when a sale price is spread over more than one tax year the default reporting method is the installment sale method reported on 6252.

The election to report the entire transaction in the initial year of sale  is accomplished by reporting the entire sale transaction on schedule D.

[Possi]

Thank you! 

I'll need to consider that. 

You always explain taxes so clearly, and send such informative links. 

I appreciate YOU. 

 

[Yardley CPA]

Congratulations!!!  

[Possi]

Thanks, y'all. The sale truly was an answer to prayer. 

Now I can sell my house and rent a nice apartment. It is the only way I can afford a salt water pool and 24/7 fitness center! LOL 

[joanmcq]

Maybe buy a condo?