Where does turbo tax deal with sale of a business.

[Tod5]

Thanks for clearing up my confusion on the absence of the 8594…  That helped!

My wife and I sold her health care clinic in 2021 to another physician in town.  For simplicity sake, we categorized the sale price as 100% goodwill, as the limited amount of tangible property assumed by the purchaser was negligible.  The business was a husband/wife LLC treated as a disregarded entity by the IRS (community property state (AZ)), so I reckon the sale follows the pattern used for sale of a sole proprietorship?

My question is how to report this goodwill?  From various threads, I get that self-created goodwill is a Section 197 intangible asset, which is treated as a short-term capital gain.  Where I get confused is how that goodwill should be reported—on Schedule D or on Form 4797 (or both)?

Tod in AZ

[Mike9241]

actually report on form 8949 code C (short-term) or code F (long)-term. form 8949 transfers to schedule D. 

short-term vs long-term is based on how long you operated the business. 

so I would enter on the 8949 sale of business - goodwill sales price $XXX,  cost $0, date acquired (date business began) and  date sold.   codes c or f just indicate to the IRS no sales form was filed (1099B)

4797 doesn't seem appropriate 

per the IRS

Use Form 4797 to report:

The sale or exchange of property.
The involuntary conversion of property and capital assets.
The disposition of noncapital assets.
The disposition of capital assets not reported on Schedule D.
The gain or loss for partners and S corporation shareholders from certain section 179 property dispositions by
partnerships and S corporations.
The computation of recapture amounts under sections 179 and 280F(b)(2) when the business use of section 179 or listed property decreases to 50% or less.
Gains or losses treated as ordinary gains or losses, if you are a trader in securities or commodities and made a mark-to-market election under Internal Revenue Code section 475(f).

[Tod5]

Thank you Mike!  I think I've got it now...  When entering the cap gain on form 8949, it does transfer to Schedule D as you indicated...  So the capital gain/sale is recorded in form 8949, then reflected in Schedule D (capital gain), and finally the sale is also reported on form 8594 by both seller and buyer (and must match amounts by category), and is generated outside of TurboTax.  The latter meaning the return has to be physically filed with the IRS...

[Mike9241]

That form is not included by Turbptax so it has to be prepared manually requiring the return to be e-filed.   

don't ask why it isn't included. numbers from that form to do flow to any other form so it would not be complicated for TT to add it.

[buckda09]

Can you add a pdf of form 8594 to an e-filing?

[DavidD66]

No, you cannot attach a PDF of Form 8594 with TurboTax.  If you need to file Form 8594-Asset Acquisition Statement.  Both the seller and purchaser of a group of assets that makes up a trade or business must use Form 8594 to report such a sale if goodwill or going concern value attaches, or could attach, to such assets and if the purchaser's basis in the assets is determined only by the amount paid for the assets.

[lavawaters]

Hello,

I have the exact scenario you describe in your answer.  I have a single member LLC (sole proprietorship for tax purposes) that I sold off a web-based software product to another company, but I still kept my LLC and use it for other business.  How would I account for this?  It seems Form 8594 is only used for selling all the business's assets and shutting it down.  Do I still use Form 8594 to report selling the software product/brand?