I sold my my small business in 2021, it was an S Corp but we sold only assets, not stocks. How do I report this in TT?

[kkalisik]

When I enter the K1 info, I keep getting asked info that I should need to. It asks if the biz ended in 2021 (Yes) then asks about the S Corp disposal I'm not sure how to answer. Does this part pertain to the stocks? I enter the K 1 info and the sale amount in Box 10 (Other income) with the code H. It keeps asking for details on the code H. My CPA told me I shouldn't need to answer that screen since I only sold the assets. Should I be reporting this another way?

[PatriciaV]

What was the source of income reported on Schedule K-1 Box 10 that you coded as Other Income?

You should have received supplemental information with the K-1 to show how to report the income for Code H. If you sold assets, any gain or loss would be either short- or long-term, depending on how long you held the assets. If none of the provided categories are appropriate, type in a custom description for the amount in the Other Description area.

[kkalisik]

Hi. There's a statement that shows: 

Form 1120-S, Page 3, Schedule K, Line 10 - Other Income (Loss)

LONG-TERM BUSINESS GAIN/LOSS - $$$$ (amount)

[kkalisik]

Would it be reported as "Long-Term Capital Gain not Portfolio Income" on the H detail?  I took a screenshot of that screen and my CPA stated that I shouldn't need to fill that info out as I only sold the assets (clients) not the stock. Stock was liquidated with form 966.

[JamesG1]

You state that your Schedule K-1 Box 10 is coded as Long-term capital gain(loss) not portfolio income.

Is your understanding that the preparer of your K-1 reported the gain or loss on disposition of the assets of the 1120-S in this gain/loss figure?

See IRS publication here.

Scroll down to Code H. Other income (loss).

[kkalisik]

No, it was coded LONG-TERM BUSINESS GAIN/LOSS. Is that the same as Long-term capital gain(loss) not portfolio income?

[PatriciaV]

Yes, business gain/loss is not portfolio income. Investments form a portfolio that may generate gains and losses. But in your situation, the long-term capital gain(loss) was business-related, not portfolio.

From the IRS Instructions for Schedule K-1: "Portfolio income includes income (not derived in the ordinary course of a trade or business) from interest, ordinary dividends, annuities or royalties, and gain or loss on the sale of property that produces such income or is held for investment."

[kkalisik]

Ok, that makes sense. When TT reviews my taxes it keeps asking me the date I acquired shares and the date I sold them. I don't understand because I did not sell the shares??? It also asks things like basis of shares. Again, no shares were sold. The corp was liquidated and dissolved according to the form 966 my CPA filed.

[RobertB4444]

As long as you have properly entered income, expenses, and the sale of the assets (to include depreciation recapture) then you're good.  Tell the system that you sold your shares for $0 and close the books.