Selling a business - how to record gain

[ScottMcc]

using TT Business to file 1065.  Multi member LLC.  

Sell the business for $500,000 - Buildings $50,000, Land $150,000 - I see in TT where to enter these parts of the sale (along with the depreciation aspects).  Lets ignore inventory.  Treat the rest as sale proceeds.

Where to I enter the remaining $300,000 in TT?  We have a total of $180,000 in our capital accounts.   So I would think there is $120,000 taxable as long term capital gains.

Does the $300,000 get reported as a sale, and the $120,000 get deducted on our personal taxes to show the true gain?

[brasstax10]

Is there any goodwill sold or going concern value? There usually is and that means you need to file a form 8594 and that sale of that is capital gain at a zero basis unless you bought it from someone else or another company. Now the $180k in the capital accounts should be basis and not taxable.

[Rick19744 · Accepted solution]

Some comments on the transaction:

• @brasstax10 is correct when discussing the form 8594.  Both buyer and seller must complete this form and attach it to their respective tax returns.  For you, that is your form 1065.
• The form 8594 for the buyer and seller must agree.  
• You will then use the form 8594 class allocation to complete your form 1065:
  • The $$ allocation to the various classes will drive the numbers you use in preparing the tax return
  • Based on your limited facts, it appears that the $300,000 will become class VII property.  As noted by @brasstax10 , this most likely has a zero basis unless you have purchased goodwill previously.
  • All this gain (assumption), will then be passed through to the member's on their respective K-1.
• You mention capital accounts.  Those are meaningless at this stage.  What IS important, is the basis that each member has in their respective LLC units.  Hopefully each member has been maintaining this.
• Each member will also be receiving their liquidating distribution.
• Each member's basis schedule will need to be adjusted for the applicable lines on the K-1.
• You will then subtract your liquidating distribution from your basis.
  • If you have basis remaining, then you report a capital loss on form 8949 and Sch D
  • If your basis goes negative, then you report a capital gain to the extent of this negative amount; so each member's basis becomes zero (can't have negative basis).  This gain will then be reported on form 8949 and Sch D
• https://www.irs.gov/pub/irs-pdf/i8594.pdf
• https://www.irs.gov/pub/irs-pdf/f8594.pdf
• For the $$ involved, you might be wise to consult with a tax professional.
• Also, the form 1065 is due Monday.  You might consider filing for an extension for the 1065.