C Corp Asset/goodwill Sale

[Hagia]

s About Taxes)/C CORP ASSET/GOODWILL SALE Advertisement Expert: Richard Fritzler - 6/26/2008 BOTH SELLER AND BUYER HAVE A LIST OF SALE ALLOCATION(FUN.& FIX., PERSONAL PROPERTY, AND GOODWILL).  SELLER(ME) DID NOT DISSOLVE THE ORIGINAL CORPORATION, HOWEVER, THE DBA NAME AND OPERATIONS WERE TRANSFERRED TO BUYER.  I HAD TO LEAVE CORP. OPEN TO COLLECT ON PREVIOUS(LARGE)LAND INSTALLMENT SALE. I DO HAVE A NO COMPETE AGREEMENT AND I CONTINUE TO WORK FOR THE BUYER AT THE PRESENT TIME.  I AM CHANGING MY ENTITY TYPE TO NOT REFLECT THE CURRENT BUSINESS SOLD.  HOW DO I SHOW THE GOODWILL ALLOCATION PROCEEDS ON THE 1120 RETURN FOR 2007(EXTENSION WAS FILED)? FUTURE RETURNS WILL MOSTLY HAVE INTEREST INCOME FROM THE INSTALLMENT PORTION OF THIS SALE AND THE PREVIOUS LAND INSTALLMENT SALE.  I NOW PAY MYSELF SALARY AND PAY TAXES FOR SUCH ON A PERSONAL LEVEL AND I PAY TAXES ON THE INTEREST INCOME ON THE CORPORATE LEVEL.  I WOULD CHANGE TO S CORP BUT I WAS TOLD MY ORIGINAL SALE MAY BECOME TAXABLE IMMEDIATELY EVEN THOUGH I STILL RECEIVE PAYMENTS.  I HOPE THIS GIVES ENOUGH INFORMATION TO HELP ME.  THANK YOU

ANSWER: You are stuck with opposing problems that can't be solved well with a single corporation.

Right now you are in the best position as a Real corporation for the sale of your business, lower taxes, better deductions, fewer audits.

As you move forward, the corporation that you have now, as it is structured would pay higher taxes on the passive income(interest in your case). You would be deemed a personal holding company.

If you are looking for the best tax treatment you can't get it from simply making asingle switch.

If you want to call, I can give you a starting point to understand where you are and where you can be.

Richard Fritzlerhttp://www.owelesstax.comhttp://www.nevadacorporateservices.com

phone 800 590-6612

---------- FOLLOW-UP ----------

I WILL CALL YOU WHEN I GET A CHANCE.  AS FAR AS 2007(THE YEAR ASSETS WERE SOLD) HOW DO I  RECORD THE INTANGIBLE PORTION OF GOOD WILL?  WHAT FORM.  ALSO IT WAS PARTIALLY INSTALLMENT.  SHOULD I  START UP ANOTHER CORP FOR 2008 AND SUBSEQUENT YEARS?  THANK YOU.

[Tiernan]

Asset sales by a C Corp are reported on Form 4797 with capital gain/loss transferring to Schedule D. The goodwill is reported here, as are all business assets. The differences of asset type can result in different depreciation recapture forms and amounts.

Form 8594, Asset Acquisition Statement Under Section 1060, is also needed for establishing sales price for you and purchase price for the buyer.

The C Corp's income tax return(Form 1120 and accompanying schedules) will evidence the income, recapture and capital gain based on your sales price, the Fair Market Value and Basis of the assets sold.

If 60% or more of the corporation's income comes from passive sources(in 2008 and beyond due to the installment sale receipts)such as interest, it now is classified as a Personal Holding Company and 15% is added to the regular corporate federal income tax brackets. Ouch. Call when you get a chance to discuss solutions.