S-Corp Asset sale in Installments Forms 1120s, 4797, 6252?

[wmdream]

S-Corp Asset sale - I sold my business (s-corp) via an asset sale. $25,000 for a non-compete(Class VI), and $600,000 for Goodwill (class VII) which is recorded on Form 8594 and attached to 1120s.  $300,000 down and the remaining balance in installments Form 6252.

I have entered the Non-Compete on Form 4797 as an intangible section 197 asset.

How do I enter the Goodwill (Class VII)?  on form 6252? little confused any help would be great

[Anonymous_]

See https://www.thetaxadviser.com/issues/2014/may/payne-may2014.html

I will also page @Rick19744 

[wmdream]

I guess my question is in TurboTax how do I record the sale class VI and VII assets for an s-corp?

[Rick19744]

Follow-up questions:

• Was this a single agreement or was the noncompete a separate agreement?
• Is the noncompete amount being paid over time as well?
• Typically noncompete agreements are separate from the asset acquisition since it is typically not the company that is agreeing not to compete, but a specific individual.  There are of course exceptions.
• What is happening to the S corp?  Staying around or liquidating?

[wmdream]

The non compete was in the sale contract and also a separate form was created (it is for 5 years). It is for the company sold and for myself. There was no specific value attached to the non-compete...I need to come to agreement with the buyer and submit Form 8594 (we are on good terms and it shouldn't be a problem). The deal was $300,000 up front (Dec 2021) and $325,000 paid in monthly installments during 2022. 

After reading more about the classifications, I believe the breakdown would be more like $300k for Goodwill, $300k for Going Concern, and $25k for non-compete.

the S-Corp will be liquidated during 2022.  It is basically a shell right now. 

Thank you for any help provided 😃

[Rick19744]

Your facts are somewhat confusing; you note a noncompete with a value, then say no value was assigned, then indicate it should be $25,000.

Hopefully the agreement has not been finalized as you need to get some professional input and documentation put together.

• Generally, when a corporation distributes, sells, or otherwise disposes of an installment note receivable, gain or loss is measured by the excess of the amount realized (in the case of a sale or exchange) or FMV (in the case of a distribution or other disposition) over the basis of the note.
• This means, if you have entered into an installment agreement for the sale of the business, distribute this note out in liquidation, you will have a taxable event and no cash.
• The key in these instances is that you need to adopt a plan of liquidation FIRST.
• If an installment obligation is acquired by an S corporation upon the sale of its assets during the 12-month period beginning on the date of adoption of a plan of complete liquidation, and the installment note is distributed to the shareholders and the liquidation is completed within the 12-month period, no gain or loss is recognized by the S corporation upon the distribution of the installment note.
• I'm not sure where this leaves you based on limited facts.
• I would also assume that the noncompete payments will be reported to you on a 1099.  As a result, I would not include this component on any installment sale form 6252.
• So essentially you have $600,000 to be reported on form 6252 with no basis.  Capital gain will be recognized as you receive the cash.

[Warm]

Did you figure it out?  I, too am trying to see where to report the non compete, since it is treated as ordinary income and cannot go on the 6252 installment form.