Discussion:Sale of business question
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Discussion Forum Index --> Basic Tax Questions --> Sale of business question
Discussion Forum Index --> Tax Questions --> Sale of business question
| 24 April 2014 | |
| Couple questions as my colleagues are on vacation.
For the sale of a dating website, the gain of the sale cannot be exchanged into another venture, correct? Like you can do with a 1031 exchange with property. I did not see anything in the pub about it and mainly read that the sale has capital gains tax. Thanks | |
| 24 April 2014 | |
| This question lacks so many facts that it is hard to know where to begin. Still, I'll begin. The statements you make in the OP about whether the "gain" can be "exchanged" and whether the sale "has" capital gains tax may be wrong. Some facts that might help are what type of entity is involved here, who owns it, what tax accounting has occurred for its expenditures, and what tax accounting has occurred for its revenues. But those are just a start. | |
| 24 April 2014 | |
| Hello, guess I'm asking in general if a sale of a business can possibly be exchanged into another business venture? If yes, here is some facts below. I wasn't sure if it was even an option from my research, so did not want to spend a lot of time on facts.
It was a sole pro (one person with a full time salaried job)and cash basis of accounting. No assets other than a client base producing revenue and he made $60k from the sale of the website with paid memberships. Every year I reported the income and wrote off expenses for website maintenance, hosting, and a home office. That's about it. | |
| 24 April 2014 | |
| When I say full time salaried job, I mean that is his day job and the website was a side venture. The website biz was a sole prop. | |
| 24 April 2014 | |
| How did client account for acquisition or development of the website? | |
| 24 April 2014 | |
| Len, not sure what you mean? Forgive me. I'm not sure he did as for acquision (meaning a deduction?), and development was written off as it was serviced. | |
| 24 April 2014 | |
| A search of the yellow box, using the term website sale, produced dozens of helpful hits.
Type of entity mattered because sometimes a corporation can give you some nice results on sale. See, e.g., Sec 1202 and Sec 1045. As to a 1031 exchange, consider whether a website can be "property" held for productive use in a trade or business, whether the property your client might acquire would be like kind, and whether the fact that everything has been written off matters. | |
| 25 April 2014 | |
| A good starting point to learn about 1031 is the IRS fact sheet:
http://www.irs.gov/uac/Like-Kind-Exchanges-Under-IRC-Code-Section-1031 A few specific exclusions are listed, as well as specific inclusions. Of course "dating website" is not mentioned at all, so one must read, read, read, to determine the intent of the code. | |
| 25 April 2014 | |
| And it says little or nothing about intangibles of this nature. It predates the CCA. | |
| 25 April 2014 | |
| With the OP's client, it sounds as if the sale has already happened. If he did not use a qualified intermediary to hold the proceeds, then it can't be treated as a 1031 exchange. | |
