S Corp - Still technically own it, but we sold the book of business

Forum|Forum|3 years ago
March 4, 2023
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We have a company that we "sold" in 2022. Technically, we still own the entity (same tax ID, etc.). In reality, the company that bought us, was an existing company that kept their own tax ID number. The sale was just for our existing book of business.

How do we report this on our tax return? One of the questions on Turbo Tax when we are filing our 1120S form, is "Was their any ownership change?" Would we answer yes or no to this?

Where / How would we report the income from the sale of that business? Would that be reported somewhere on our 1120S or would it be reported on our personal 1040? Also, we assumed that income from the sale would be considered a capital gain; is that correct? As I said, technically we still are the owners of the entity.

Mike9241

there is no ownership change. you and the buyer are each supposed to include form 8594 in your respective tax return for the year of sale/purchase. If you do not file a correct Form 8594 by the due date of your return and you cannot show reasonable cause, you may be subject to penalties. See sections 6721 through 6724. Book of business would appear to be a Section 197 intangible so its report it in part VI. you get capital gain treatment. there is unlikely to be a cost basis in the list. the capital gain will pass out to the shareholders through the k-1. report the sale on form 8949 unless it is an installment sale then use form 6252 to report the gain as you collect the proceeds. this is not required and you don't use it if all the proceeds are received in the year of sale.