Question

S-Corp Asset sale in Installments Forms 1120s, 4797, 6252?

Forum|Forum|4 years ago
April 7, 2022
3 replies
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S-Corp Asset sale - I sold my business (s-corp) via an asset sale. $25,000 for a non-compete(Class VI), and $600,000 for Goodwill (class VII) which is recorded on Form 8594 and attached to 1120s. $300,000 down and the remaining balance in installments Form 6252.

I have entered the Non-Compete on Form 4797 as an intangible section 197 asset.

How do I enter the Goodwill (Class VII)? on form 6252? little confused any help would be great

TurboTax Business Windows

A

Anonymous_

Employee

See https://www.thetaxadviser.com/issues/2014/may/payne-may2014.html

I will also page @Rick19744

W

wmdreamAuthor

I guess my question is in TurboTax how do I record the sale class VI and VII assets for an s-corp?

Rick19744

Employee

Follow-up questions:

Was this a single agreement or was the noncompete a separate agreement?
Is the noncompete amount being paid over time as well?
Typically noncompete agreements are separate from the asset acquisition since it is typically not the company that is agreeing not to compete, but a specific individual. There are of course exceptions.
What is happening to the S corp? Staying around or liquidating?

*A reminder that posts in a forum such as this do not constitute tax advice.Also keep in mind the date of replies, as tax law changes.

W

wmdreamAuthor

The non compete was in the sale contract and also a separate form was created (it is for 5 years). It is for the company sold and for myself. There was no specific value attached to the non-compete...I need to come to agreement with the buyer and submit Form 8594 (we are on good terms and it shouldn't be a problem). The deal was $300,000 up front (Dec 2021) and $325,000 paid in monthly installments during 2022.

After reading more about the classifications, I believe the breakdown would be more like $300k for Goodwill, $300k for Going Concern, and $25k for non-compete.

the S-Corp will be liquidated during 2022. It is basically a shell right now.

Thank you for any help provided 😃

W

Warm

Did you figure it out? I, too am trying to see where to report the non compete, since it is treated as ordinary income and cannot go on the 6252 installment form.