Disolving LLC & sale of business

[snowshoe]

I don't know why I can't figure it out, but here I am. i went to the IRS pubs & can't get a definitive 'here's how ya do it'. (go figure!)

Anyhow, client has a small LLC (husband & wife)- it was a courier service.
They have sold the business, which was really just the agreement to not compete & letting the new guy take over their contracts. The LLC, was not part of the sale & is just being dissolved. The terms are sale price of $20K- paid $10k down & $500/month interest free. Buyer isn't related. The LLC had depreciated a vehicle, which i don't believe was part of the sale & is retained by my client. The LLC had no other assets or receivables or debt.

So, what do I have to report on the 1065? and what & how do I report on the 1040?

Is the sale reported on a 4797 on the 1040? Does the truck factor in there anywhere?

The clients (well the husband) has begun a new venture as a Sole Proprietor & will likely be using the same vehicle.

I feel like I'm making this into a big complicated thing & I don't think it is... help!

[Corduroy Frog]

Form 8594 (I think)

Requires the sale of the business to be broken down by elements which were sold. The effect is to split the profit/loss into different characters of income. Observe in particular the covenant not to compete.

Review the installment agreement also. There is no such thing as an interest-free loan. Taxpayers claim there is no interest because they want to keep it simple, but IRS says "no." There MUST be imputed interest if the term is longer than one year.

Taxpayers may wish to retain the LLC intact, and simply sell their assets if they have started another business.