cost basis of sale of business

[ronj5031]

I sold my dental practice in 2021.  How do I determine the cost basis of the property?

[LeonardS]

Could you please clarify what you mean by property I.E, are you referring to real property, equipment  or both?

[ronj5031]

Thank you for responding.  The sale of the practice was mostly for good will and equipment.  So is my  basis the value of the equipment?

[LeonardS · Accepted solution]

Yes, however, there are special conditions when there is the sale of a complete business I.E. your dental practice.  Basically, you and the purchaser will determine the value of the equipment the remaining and largest amount is usually for goodwill.

"...Generally, both the purchaser and seller must file Form 8594 and attach it to their income tax returns (Forms 1040, 1041, 1065, 1120, 1120-S, etc.) when there is a transfer of a group of assets that makes up a trade or business (defined below) and the purchaser's basis in such assets is determined wholly by the amount paid for the assets. This applies whether the group of assets constitutes a trade or business in the hands of the seller, the purchaser, or both..." Ref  IRS: https://Instructions for Form 8594