Sale of Business

[dsi]

edit: Also, the full 1000 share sale is reported on form 6252, "Installment Sale" as a code §1221 capital asset with gain from proceeds received flowing to 1040 Sch-D.

Are you certain it is sec 1221?

[OldJack]

Are you certain it is sec 1221?

-CITE-
26 USC Sec. 1221 01/19/04

-EXPCITE-
TITLE 26 - INTERNAL REVENUE CODE
Subtitle A - Income Taxes
CHAPTER 1 - NORMAL TAXES AND SURTAXES
Subchapter P - Capital Gains and Losses
PART III - GENERAL RULES FOR DETERMINING CAPITAL GAINS AND LOSSES

-HEAD-
Sec. 1221. Capital asset defined

-STATUTE-
(a) In general
For purposes of this subtitle, the term "capital asset" means
property held by the taxpayer (whether or not connected with his
trade or business), but does not include - ...............

[OldJack]

Are you certain it is sec 1221?

Here are some other code sections for other type properties:

TITLE 26 - INTERNAL REVENUE CODE
Subtitle A - Income Taxes
CHAPTER 1 - NORMAL TAXES AND SURTAXES
Subchapter P - Capital Gains and Losses
PART IV - SPECIAL RULES FOR DETERMINING CAPITAL GAINS AND LOSSES

-HEAD-
PART IV - SPECIAL RULES FOR DETERMINING CAPITAL GAINS AND LOSSES

-MISC1-
Sec.
1231. Property used in the trade or business and involuntary
conversions.
[1232 to 1232B. Repealed.]
1233. Gains and losses from short sales.
1234. Options to buy or sell.
1234A. Gains or losses from certain terminations.
1234B. Securities futures contracts.(!1)
1235. Sale or exchange of patents.
1236. Dealers in securities.
1237. Real property subdivided for sale.
[1238. Repealed.]
1239. Gain from sale of certain property between spouses or
between an individual and a controlled
corporation.(!1)
[1240. Repealed.]
1241. Cancellation of lease or distributor's agreement.
1242. Losses on small business investment company stock.
1243. Loss of small business investment company.
1244. Losses on small business stock.
1245. Gain from dispositions of certain depreciable
property.
1246. Gain on foreign investment company stock.
1247. Election by foreign investment companies to distribute
income currently.
1248. Gain from certain sales or exchanges of stock in
certain foreign corporations.
1249. Gain from certain sales or exchanges of patents, etc.,
to foreign corporations.
1250. Gain from dispositions of certain depreciable realty.
[1251. Repealed.]
1252. Gain from the disposition of farm land.(!1)
1253. Transfers of franchises, trademarks, and trade names.
1254. Gain from disposition of interest in oil, gas,
geothermal, or other mineral properties.
1255. Gain from disposition of section 126 property.
1256. Section 1256 contracts marked to market.
1257. Disposition of converted wetlands or highly erodible
croplands.
1258. Recharacterization of gain from certain financial
transactions.
1259. Constructive sales treatment for appreciated financial
positions.
1260. Gains from constructive ownership transactions.

[OldJack]

Absolutely, make sure the election to treat the S year as two short years. It requires consent of all the shareholders, so it will need to be in the agreement. Otherwise somebody's going to come out on the short end of the stick and you can forget about agreeing to it later.

Armando is correct. Well I have learned two thing already today. They just keep coming up with elections and I have no idea how long that election has been required to be attached to the 1120S tax return. I have been doing it by closing the books for years by shareholder agreement and I am sure it was long before any requirement to attach an election to the return. Thanks for setting me straight Armando.

[veritas]

Lacerte has the election available if you elect to cut off the books.


Trivia question;

What was the nickname of Jet Jackson's sidekick?

[OldJack]

What was the nickname of Jet Jackson's sidekick?

Was Jet Jackson a tax preparer? :-)

[dsi]

Where in the Lacerte program is there a box to check that indicates a sec1221 asset is being disposed of?

[JoshinNC]

So, where is this sale reported?

Is this a sale of stock, reported on Schedule D, or is it simply reported as Armando stated, with the seller and buyer recieving annotated K-1's. I presume you would not do both?

Thanks!

[geekgirldany]

It is both. In my situation it is. There is two tax years for the S-corp. So my client gets a K-1 for the first tax year. New shareholders/owners get K-1 for the second tax year. The sale of the stock/business was written up as an installment agreement payable over so many years. So I will figure the basis on stock for my client and do an installment sale form. In my case the new owners/shareholders are paying my client directly. LIke I said this is how I think it works in my situation. Yours sound similar.