Where to list Goodwill

[newbie]

Business was sold and a portion was allocated to Goodwill. Do I list this on form 4797? or directly on Schedule D?

[S T]

Goodwill

Self Created Goodwill (never amortized) or Purchased Goodwill on Purchase of Business (Amortized)?

Sandy

[newbie]

Self created Goodwill that was never amortized.

[newbie]

Anyone have any advice?

[dsi]

D................................................. ...

[RJM]

4797 part 1

I would put it on 4797 part 1, then it flows to sch D.

[newbie]

That is my dilema, I know in the end it will be on Schedule D, but do I initially enter on 4797 or do I enter it directly on Sched D? Either way the bottom line tax implications will be the same but I would like to do it correctly.

By ST's question "Self Created Goodwill (never amortized) or Purchased Goodwill on Purchase of Business (Amortized)?", I'm assuming there is a difference in reporting but I'm not sure?

[Bees Knees]

That is my dilema, I know in the end it will be on Schedule D, but do I initially enter on 4797 or do I enter it directly on Sched D? Either way the bottom line tax implications will be the same but I would like to do it correctly.

The sale of self created goodwill goes directly to the Schedule D.

TTB Small Business edition, page SB13-5 chart says the sale of self created goodwill and other intangibles is taxed as a capital gain. The sale of acquired Section 197 intangibles (where you purchased goodwill from someone else) is taxed as ordinary income for the amount of gain that represents prior amortization, and any excess is a capital gain.

The sale of business example on page SB13-7 has the business selling $50,000 worth of self created goodwill (the customer list). The C Corporation example of that sale on page SB13-17 shows the sale of that goodwill being reported directly on the Schedule D of Form 1120, and NOT on Form 4797. Whereas if that business had originally purchased the goodwill and had amortized its cost, it would have been first reported on the 4797 with amortization recapture flowing to part II, ordinary gains, and capital gains flowing to Schedule D.

The S Corporation example and the partnership example in Tab SB13 do not show the sale of goodwill on either the Schedule D or the 4797 because the example has all of the gain being reported on the installment sale method, which is recognized by the former shareholder or partner on Form 6252 as principal payments are received. Gain from the 6252 flows directly to the Schedule D of the former shareholder or partner’s 1040.

Assuming you are talking about a Schedule C business selling goodwill and the sale is not being reported under the installment method, the Schedule C business sale would report the sale of self created goodwill similar to the C corporation example, directly on the Schedule D with zero basis.