Discussion:Business acquired, confusion!!!
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| 15 March 2007 | |
| Hi everyone, help me please!
I have a client who acquired a business in 2006. I reviewed the "bill of sale" and saw a total of purchase is $35K, which included everything such as furniture, fixtures, goodwill, inventory, and ect... There is NO list of detail price for each item. Since it is a lumpsum amount, please guide me how to depreciate these items, or how to take deductions of this acquired business. A bunch of thanks in advance. Many of you are so GREAT to answer these questions, althought you are super busy with your tax clients. | |
| March 15, 2007 | |
| There is to be a signed Asset Acquisition Statement signed by both parties which specifies that. Maybe see the contract. | |
Bottom Line (talk|edits) said: | 15 March 2007 |
| Since total purchase price was only $35,000, may not have detail or asset acquisition statement. Get a fair market value of the tangible assets (hate to have to pay for an appraisal but may be the only way depending upon what the business is). The rest would be goodwill. Ask your client how the $35,000 price was determined. | |
| March 15, 2007 | |
| The AAS is required regardless of amt. I do believe...tho' usually ignored by them attorneys... | |
| 15 March 2007 | |
| Study form 8594 (AAS) and related instructions then sit down with the client and fill it out. Assign FMV to each class of tangible asset then whatever is left over is goodwill. Both parties to the deal are supposed to file the form with their return when assets that make up a trade or business are transfered. | |
| 15 March 2007 | |
| It's amazing people can spend $35k for something in which they don't know exactly what they're buying! Start with their attorney and ask how the price was determined. If they can't help then sit with client to estimate a FMV of the items purchased and put difference to Goodwill. 8594 is definitely required. | |
| March 15, 2007 | |
| Almost everytime I try to talk a client out of buying a business, they go ahead with it anyway.
After I break the numbers down to them, I say, "If you would like to pay somebody $150,000 to work for $25,000 a year, I have an opening for you here at my office." Finally, this last year I got my first, "You were right, Paul. We shouldn't have done this." I danced the 'I told you so' dance after they left my office. | |
| March 15, 2007 | |
| I'm usually on the other side, trying to talk the seller out of selling out for what will often equal one year's income, after the taxes are paid! We should get together. . . | |
| March 15, 2007 | |
| J&P Business Brokers! We could pocket about 70% of the Goodwill. | |
| 15 March 2007 | |
| Thanks SO MUCH for all of your suggestion. I will definitely talk to my client and let him decide whether or not to hire an appraiser.
Happy Tax Season!!! | |
