1120 S Corp

[John5156]

I closed my business a few years ago and once a year I receive a payment from the corporation I sold it to for the sale of my clients for the next 10 years. I am not in business selling or nor do I have employees so my question is on the 1120 S tax form it ask if the business has closed, and if so, what year. Should I say I am closed since I sold my client list and the accounts or I am active since I am receiving my payout from selling and I am writing off business expenses to offset the income? 

Rj

[dsoile]

Hello John 5156

Here is a link about reporting installment sales on your Form 1040

Installment Sale Reporting

Asset Acquisition Statement

Also, regarding the closure of your S-Corp. The final return should have been filed either 10 years ago or on the tax year in which you sold your business

I hope this helps @John5156 

Based on what you mentioned and the details provided, since you closed the business via selling the business to another entity, yet still receive payouts from the business as well as you mentioning that you are not active in either the business you sold nor are you active in the entity that  bought out your business, yet are receiving payout from this entity, you would be considered passive as far as activity type, thus your income from this entity will be passive, and in order to reduce passive income, you need passive losses. 

You would say that your business is closed, and provide the reason for closure of the business.  In this case it would be the client lists and accounts you included in the sale of your business .You will indicate the year of business close in the year you sold your business.

[Edited 6/5/2024|8:06am PST]

@John5156