Discussion:Asset Sale at lower than cost
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Discussion Forum Index --> Advanced Tax Questions --> Asset Sale at lower than cost
Discussion Forum Index --> Tax Questions --> Asset Sale at lower than cost
Actionbsns (talk|edits) said: | 1 August 2008 |
| I have an LLC taxed as a partnership, two members, sold their business in 2007 for a total price of $39079.00. They owned it exactly one year and paid $147,500 for equipment, fixtures, goodwill and a covenent not to compete. The sales documents indicate the sales price in 2007 is $30,000 for machinery and equipment and $9,079 for inventory. So they are abandoning the goodwill, the covenant, and some of the assets. Under Machinery and Equipment there are two assets more valuable than the rest, their cost basis is a total of $50,000. My question is whether it makes any difference if I enter the sale price on everything else as zero and apply the $30,000 to these two larger assets? This is a bakery and all assets are bakery type assets, no real estate involved. As always, I'm open to things I have to watch out for so I don't make an inadvertent mistake. | |
| 1 August 2008 | |
| Why don"t you lump all the assets together and record the $30,000 as the selling price as one line item on tax return? Won't it all come out the same? | |
RoyDaleOne (talk|edits) said: | 1 August 2008 |
| You should allocate the selling price to only the assets that were sold. Allocate $9,079 inventory, $30,000 to equipment.
The rest of the assets should be treated as worthless and handled as such. If you lump the assets together it may all come out the same, however, that is not what happened. | |
Actionbsns (talk|edits) said: | 1 August 2008 |
| Under Machinery and Equipment are listed about 40 different items, two of which cost a total of $50,000, costs on the rest of them are all over the place. If I lump them into one selling price on the tax return, I won't clear the depreciation schedule, so tentatively, what I've done is to record sale date and zero price on everything in that category, except the two major assets. It's easier and it doesn't sound like it will make much difference as long as they are the category stated in the sales agreement, as Roy points out. Is there another way to book this within the tax return other than within the asset list? | |
| 1 August 2008 | |
| You do not need to attach a depreciation schedule to tax return. Just add them up and re enter using dates acquired as various and the totals. Keep it simple. | |
RoyDaleOne (talk|edits) said: | 1 August 2008 |
| The software I use can do a bulk sale, select bulk sale, pick the assets, enter the gross sales price, enter expense of sell, click the button, all done. The program allocates the selling price and expense of sale over the various assets selected. Does your software have this capability? | |
Me and the Boss (talk|edits) said: | 1 August 2008 |
| Roy, that is a very nice feature in your software. We use Intuit ProSeries (kudos to the Site Sponsor), but I don't think it has that feature. If it does, can someone clue me in?
Actionbsns, I too have gone the route that you suggest, with the sales proceeds being allocated to the "big stuff" and the rest showing a sales price of zero. It will get the job done, but it is tedious. It also makes for about 16 pages of Form 4797 - ugh! I have also gone back to the client's prior year return, put all the 7 year recovery property in as one asset with the total cost basis being the original cost basis of all the 7 year property. Likewise for accumulated depreciation. I then wiped out all the separate assets and made sure my "new" prior year return matched the previous year's "as filed" copy in all respects except for the level of detail regarding the 7 year property. Then transfer the "single asset" return to the current year tax program and sell the single asset as normal. Nice clean return, clears off the depreciation schedules, and I have all the back up ready to support the calculated end result. Woof! | |
| August 1, 2008 | |
| I cried out for that feature last year, the bulk sale, on my largest clients with pages and pages of assets...so far, no word. | |
