Sale of Assets installment sale - S Corporation

[Hamacher]

I have a client that had a complete asset sale in 2015. She is going to receive payments over the next 15 years. Is there any way to simply reflect the future payments on her personal return or will she need to file a Corporate return for the next 15 years?

[BHoffman]

Google this: asset sale of s corp installment tax

It will present you with a lot of information regarding S Corp sale of assets on the installment basis and how it should be reported.

HTH and BTW: I'm not trying to foist off an answer by referring you to Google. It's pretty complicated tax strategy to discuss on the forum.

[Roland Slugg]

Your post is not clear to me. It starts out by saying ...

I have a client that had a complete asset sale in 2015. She is going to receive payments over the next 15 years.

... but then goes on to refer to a corporation and, in the post's title, an S Corp. So who sold the assets? Are you referring to the corporation as a "she?"

If an S Corporation sold the assets, the installment obligation arising from the sale can be distributed to the shareholder without triggering the gain from disposition of an installment obligation PROVIDED THAT the corp adopted a "Plan of Liquidation" prior to selling those assets. It must then completely liquidate and dissolve with one year. See Code §453B(h).

If the assets were, indeed, sold by a corp/S corp) before a plan of liquidation was adopted, then any distribution of the installment obligation to the shareholder will trigger recognition of the remaining gain.

Will she need to file a Corporate return for the next 15 years?

Yes, if she wants to continue to defer the remaining, unrecognized gain ... unless the above explanation applies.

[DaveinTexas]

A side question

Just a side question to add to that has me puzzled Mr. S.

What if you have a client with an S Corporation that wants to sell the business to an unrelated 3rd party; let's say their stock basis is $500,000. The purchaser wants nothing to do with the stock of the S Corp and only wants to purchase the assets of the company, including Goodwill/Going Concern.

Can the client apply his $500,000 stock basis to offset the sales price of the Goodwill and the assets sold? OR is the client stuck with liquidating the assets (first) offsetting any gains on the liquidation with his stock basis and realizing the full amount of tax due on the sale of the Goodwill?

The reason I ask this is because often times when a client that owns an S Corp wants to "sell their business", the deal has nothing to do with their Stock. It only has to do with the assets of the company. So, what I am saying is, if there is NO equipment involved and the purchaser is only buying Inventory and Goodwill (client list and other intangibles) is it worth anything in a sale of a business to have stock basis in an S Corp tax structure? Or, should the client consider distributing profits prior to the sale to "use up" their stock basis if it is just worthless?