A Little Help Please...

[BOB W]

... I have a Doctor that sold her practice and I have the allocation for the sale. Can someone tell be what is capital gaines and what is ordinary income. I know that the ordinary income portion is not eligble for installment sale. Here are the catogories.

Patient Records and Patient List

Goodwill

Leasehold Improvements

Restrictive Covenant

[OldJack]

See Pub 544, Sale of Assets and Pub 537 Installment Sales:

Assuming held more than 1 year for capital gain consideration.
All is reported on Installment sale and form 4797. Nothing is reported on Sch-D unless it flows from the form 4797 to Sch-D.
All depreciation or amortization is recaptured as ordinary income in year of sale.
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1. Patient Records and Patient List? This is code §197 & §1231 asset classified as a intangible asset pub 544, page 22. You would get Sch-D treatment after any nonrecaptured net §1231 losses of prior years recapture (4797, line 8) through form 4797.

2. Goodwill? This is code §197 & §1231 asset classified as a intangible asset pub 544, page 22. You would get Sch-D capital gain treatment through form 4797 after recapture of amortization.

3. Leasehold Improvements This is code §1245 asset and ordinary income write-off and recapture reported on form 4797. This is treated the same as the sale of any equipment.

4. Restrictive Covenant? This is code §197 & §1231 asset classified as a intangible asset pub 544, page 22. And classified as a non-capital asset (form 4797), pub 544, page 19, item 3, and subject to ordinary income for the seller (Small Business Quickfinder page N-15 & N-16).

[BOB W]

Old Jack

thank you so much for you feedback w/ cites.