Income from sale of S-Corp

[valuecare]

I sold my (S-Corp) cleaning business last year. I received half down which I reported on my 2022 corporate taxes. I am receiving 20 monthly payments from a promissory note from the purchaser which include principal and interest. So, the only "income" that I received from the business in 2023 was the monthly payments. How do I show this on my corporate tax return for 2023 and 2024?.

[Anonymous_]

I'm going to page @Rick19744 for input, but you should probably seek guidance from a local tax professional.

[Rick19744 · Accepted solution]

You need to meet with a tax professional so this is handled properly:

• In the year of sale, both the buyer and seller should have completed and filed form 8594 and you should have attached your form 8594 (with the seller box checked) to your 1120-S.
• Additionally, you should have completed and filed form 6252 Installment Sale and included it with your 2022 form 1120-S.
• The form 6252 will provide details on the overall gain, what needed to be recognized in the year of sale, and what is recognized as payments are received; ie: in subsequent years when received.
• You don't indicate if your S corporation is still active.  This can be a trap for the unwary; there is a best way and a bad way when you liquidate an S corporation that has an installment sale.  So discuss your plans with the tax professional.

[valuecare]

Wow, I truly appreciate your post! Just to let you know, I kept the S-Corp active just in case I needed to. 

[Mike9241]

if you filed the 8594, 6252 in 2022 and keep the S-Corp alive then there is probably no need to use a pro.

On the 2023 Form 6252 you would enter principal and interest received, Turbotax will calculate the portion of the principal payments that are taxable. other than those items you need to enter any distributions you took and any other ordinary and necessary expenses and any income that is not from the installment sale.

[valuecare]

Thanks!! So when I receive the last payment in October of 2024, I can just close out the S-Corp?

[Rick19744]

Yes, assuming you filed all the appropriate forms in 2022 as noted.

Don't forget to file any required state forms upon dissolution of the 1120-S.