Sale of Biz--S Corp

[Unregistered]

Could someone walk me through this?

I have a client selling his landscaping biz. The biz is a S corporation, one shareholder, all of his equipment in his name. Most of the equipment is without basis due to past depreciation. His gross receipts have averaged about 600k per year with decent profits.

Anywho, lets say he sells his biz for $500k for his client lists and equipment. I know you report the equipment sale on the 4797 and the client list on the sch D. Do I need to allocate any portion of the sale to the stock that he owns in the corp? Or should I report the entire sale on his individual return and file a final return for the S corp?

Also, please be gentle, as I am mostly familiar with individual returns and Sole Props.

Thanks in advance.

[jimmcg]

Not clear from the limited facts given if this is a sale of stock in the Corp. or a sale of assets by the Corp. and the individual.

[Unregistered]

No sale of stock is involved. The interested parties just want to purchase his assets and the client list. I hope I didn't just answer my own question.

[Unregistered]

I think you did

Basically, with my limited understanding of this issue, you report the asset sale on the 1040 and file a final 1120. But, I'll take any advice outside of mine on this.

By the way, how old is the client and what does he intend to do with the 500k?

JoshInNC

[Bees Knees]

Not so fast here. This could get complicated.

You need to know who owns what. You said the equipment is in the individual's name. You did not say who owns the customer list. S corp, or individual?

If the equipment was owned outside of the S corp, then the sale would be reported on the individual's 4797. But if the S corp owned the equipment, it goes on the S corp's 4797.

Same is true for the customer list. Schedule D of either the individual, or the S corp, depending on who owns the customer list.

Since no S corp stock is sold, the S corp still exists after the sale. Liquidating the S corp would then be the next step after all business assets are sold.

Also remember to do an 8594, since this represents a sale of assets that make up a business.