Commission Based Business Sale

[Don Hughes]

Insurance agency sold, Questions are:

1) Sold in November 2023, not reported in 2023. No income received but installment plan set up for 3 years.

2) Sale pride = to 1 year's commissions, to be paid over 3 years, equal payments each year to be received.

What is the basis, the 1 year commission?

Do we need to amend 2023 since the sale occurred in 2023 even if no income exchanges, per the TP?

Thanks. Ya gotta love the 11th hour folks!!

 

 

[Abby Normal]

Since no money was received in 23, there might not be any tax, unless depreciated assets were sold. See line 12 of form 6252.

When a business is sold, both parties need to agree on the price allocation and file form 8594, so that both parties are accounting for the sale the same way.

[Corduroy Frog]

Form 8594 is the brainchild of the IRS, for purposes of assigning dollars to Goodwill, which is amortized over eons of time.  It's anyone's guess as to how accurate the buyers/sellers could be.  (Not very)  Most sales occur before the parties even know an 8594 should be filed, and the tax preparer rarely can see that this is done.

[Don Hughes]

Thank you!!

[taxit]

I believe the 8594 is only required if there is more than one type of asset sold. It seems you only have a book of business.