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Sale of LLC

Jen16
Level 1

I have a client who sold their landscaping business in 2020, I am wondering how to classify the income he received that is associated to the client base and existing accounts.  Basically the business was around for several years, had a bunch of current and recent clients, plus the trucks and equipment.  So I have the vehicles and equipment all set but not quite sure how to classify the remaining sales income that would cover the existing client accounts.  Thanks.

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TaxGuyBill
Level 15

@Jen16 wrote:

how to classify the income he received that is associated to the client base and existing accounts. 


Sale of a client list/goodwill/ongoing concern is a capital gain.  So you create an Asset Entry Worksheet with $0 of Basis, and report the sale in the disposition area.

As George mentioned, be sure you fill out Form 8594 to show the allocation of the assets.

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3 Replies 3
George4Tacks
Level 15

What does the sales agreement say? How are you going to complete the Form 8594? 


ex-AllStar
TaxGuyBill
Level 15

@Jen16 wrote:

how to classify the income he received that is associated to the client base and existing accounts. 


Sale of a client list/goodwill/ongoing concern is a capital gain.  So you create an Asset Entry Worksheet with $0 of Basis, and report the sale in the disposition area.

As George mentioned, be sure you fill out Form 8594 to show the allocation of the assets.

View solution in original post

Jen16
Level 1

Thank you!