Repossession

[S T]

I have a limited partnership that sold their franchise (business equipment, leasehold improvements and goodwill) 8/22/05. It was sold with the seller carrying a note. The buyer defaulted 8/06

The seller spent a lot of months trying to collect outstanding note , and incurring legal fees for repossession of property, and ultimately in 12/07 resold the property. The property/business sat vacant and no activity for trade or business operations.

The original sale was reported with business assets recording a loss form 4797, and goodwill gain reported on installment sale. For repossession calculation do I include the equipment and other assets as well as the Goodwill? Or do I just calculate using the Goodwill on the Installment Sale. Note outstanding $114,205, $100,000 received on 12/07 sale. Would FMV be what the 12/07 sale was recorded for?

Another question for this transaction, are the legal fees incurred on the repossession, used as an expense, or are they added to the basis?

And, the taxpayer had guaranteed the lease, so when the business was resold in 12/07 had to pay delinquent lease payments on property so they could be removed from the lease on the transfer. Are those payments expensed or are they added to basis?

What a mess!

Thanks,

Sandy

[BOB W]

I have a limited partnership that sold their franchise (business equipment, leasehold improvements and goodwill) 8/22/05. It was sold with the seller carrying a note. The buyer defaulted 8/06

The seller spent a lot of months trying to collect outstanding note , and incurring legal fees for repossession of property, and ultimately in 12/07 resold the property. The property/business sat vacant and no activity for trade or business operations.

The original sale was reported with business assets recording a loss form 4797, and goodwill gain reported on installment sale. For repossession calculation do I include the equipment and other assets as well as the Goodwill? Or do I just calculate using the Goodwill on the Installment Sale. Note outstanding $114,205, $100,000 received on 12/07 sale. Would FMV be what the 12/07 sale was recorded for?

Another question for this transaction, are the legal fees incurred on the repossession, used as an expense, or are they added to the basis?

And, the taxpayer had guaranteed the lease, so when the business was resold in 12/07 had to pay delinquent lease payments on property so they could be removed from the lease on the transfer. Are those payments expensed or are they added to basis?

What a mess!

Thanks,

Sandy

Sandy check out 14-11 on the 2006 Web CD there is a full recomputation on this in there.

[fliszt]

Sandy, where

do you find these all these type returns???? Do you put an ad in the paper for them?
Larry

[S T]

Clients that didn't listen

Thank goodness I don't advertise.

They are just clients that didn't listen, when I said not to do it! On this one the hand writing was on the wall when the taxpayer started the business and even more so 1.5 years later when the sale took place in August 05, but no one would listen.

So here we are! I have had a few too many of "weird" scenarios in 06/07, so I am hoping 08 will be much more normal, altho I don't want any of those "crazy" qualifying relative and dependent returns either. Oops forgot, I will probably have the "mortgage interest" over limit returns in 07, what fun that will be!

Any suggestions!

Sandy