Hi Everyone,

I have a client who sold his S-Corp business and I want to make sure I set up the sale correctly for 2022. The client was a sole owner of the S-Corp. It was a chiropractor practice.

The sale to a colleague was for approximately $120k and included transfer of clients and medical equipment/instrumentation and chiropractic tables. It was one transaction, and they did not bother to break it down or distinguish the assets. I know to set this up on his personal 1040 schedule D, with the number of shares he sold, but my biggest confusion is with respect to the basis. Also, I want to confirm how to close out the 1120S with respect to the sale and final return.

On the 1120S - The medical equipment/tables are listed under his assets (and the balance sheet) but are fully depreciated now. The other item he has on the balance sheet is Goodwill from when he had purchased a clientele from another chiro years ago, and about half of that was amortized. The biggest items on his balance sheet are cash for assets and retained earnings under liabilities. I believe cash and retained earnings will be excluded from the basis...? 

When he started the business his initial investment/basis was about $300k ($160k in medical equipment purchases - now fully depreciated, and another $140k in Goodwill - now half amortized). It is the Goodwill that throws me off and also reporting disposition of the assets.

Overall, for his basis on 1040 Schedule D, do I use the $70k - what is left of his Goodwill investment? and proceeds $120k? But how do I report the disposal of the assets on 1120S to prepare final return?

Any advice or guidance would be greatly appreciated. Thank you