I have a client, taxed as S Corporation, that purchased an insurace agency for $200,000 (primarily all intangible assets - goodwill, customer list, noncompete, etc.) in 2007. My client still owes $54,000 to the seller. The seller approached my client and said that if he paid him $24,000 he would forgive the rest of the laibility. Is there any way around the $30,000 being included as taxable income? My client is having a hard time accepting that he has to pick up the entire amount as income but is forced to write off the assets over 15 years. Any help would be appreciated.
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Doesn't this qualify under the price reduction rules? -
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Another thought
What if the original seller agrees to buy back some of the goodwill for $30,000... Trying to think outside the box here.
Anyone have a thougth?Comment
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If you buy property that's financed by the seller, and the seller agrees to lower the principal on the debt, it's treated as a price reduction, resulting in the basis being reduced and not cancellation of debt. The buyer can't be insolvent or bankrupt to apply this rule. Start by looking at "Price Reduced After Purchase" in Pub 4681.Originally posted by Hamacher View PostComment
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