Purchase / Sale of Business

[rfk]

Need some help if you folks have the time and inclination:

Client purchased QS Franchise in May 1999; they sold in about Jan. 2005.

The rundown,

Purchase facts:

Deposit $5,000
Franchise fee 30,000
Goodwill 95,000
Open Acct (definition yet to be determined by me) items and Licenses 10,000
Inventory 52,000
Fees to Start up, Airfare, etc. 10,000

Purchase Price $202,000

Sale facts:

Goodwill 175,000
Note payable 24,000
Inventory 32,231
Less: Broker fee (10,500)
Less:Assumption of remaining Note (9,000)

Net Sale Price $211,739

What is the best way to approach this valuation for producing tax forms, etc. (form 8594 and 4797, as starters). It was a Sole Prop when doing business.

I hope I did not miss anything. Thank you for your help in advance.

Ray

[Bees Knees]

TTB, page 25-3 has a chart that lists the various tax rules that apply to the purchase and sale of each asset. You have to look at each asset separately and determine the gain or loss of each on the sales transaction. Then, depending on the type of asset, gain or loss is treated differently.

[rfk]

Thank you Bees.

Ray