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vermard2
New Member

Do I issue a 1099-NEC for payments made to an individual for the purchase of a sole proprietorship business?

I'm a self-employed insurance agent and bought another agent's book of business. We both file as sole proprietors - Should I issue them a 1099-NEC for payments I made to them for the business ownership? They want to report their profits from the sale as capital gains and installment income on form 6252. I paid them $17k in 2020 and will pay them $30k in 2021 and $30k in 2022. I have a large tax bill if I can't claim my payments to them, but I'm not sure the proper way to do it, if any. Thanks!
2 Replies
martinmarks1919
Level 9

Do I issue a 1099-NEC for payments made to an individual for the purchase of a sole proprietorship business?

Do not issue a 1099-NEC because the payments you're making aren't for a contractor and aren't income from self employment to the previous business owner. What you bought is a Sec 197 intangible in the form of a book of business or accounts and those are amortized over 15 years. Lawyers should have rep'd both sides in this transaction.

vermard2
New Member

Do I issue a 1099-NEC for payments made to an individual for the purchase of a sole proprietorship business?

Thank you so much for the advice - doing research on how to amortize Section 197 assets. Will likely get some lawyers involved. I worked for my senior agent for 8 years as a 1099 employee and when he passed away in March 2020 I agreed to pay his widow to retain/take over the book of business. Since we were close and she was grieving we skipped what seems to be some essential steps that will need to be corrected now.

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