S-Corp Installment Sale

[Walkman]

In 2019 I sold the majority function of my S-Corp via an Installment Sale Asset Purchase Agreement. I do not plan to liquidate the S-Corp but it will have no income in 2020. 2019 Proceeds were for inventory. Future year proceeds are allocated for intangible assets & Goodwill. The 2019 1120-S resulted in a (loss) because inventory was sold at less than book value.

Help with the following questions would be greatly appreciated.

1) Should future payments for the APA go to the S-corp since it is not being liquidated?

2) Where do I recognize the installment sale proceeds for future years for the business? Does it go on an 1120S, or only on a K-1?

3) Since future year APA proceeds will be treated as long-term capital gains am I still able to recognize the 2019 loss amount that was greater than my S-corp basis?

[Critter · Accepted solution]

1) Should future payments for the APA go to the S-corp since it is not being liquidated?  Yes ... the company still has income from the installment sale

2) Where do I recognize the installment sale proceeds for future years for the business? Does it go on an 1120S, or only on a K-1?  You will continue to file an 1120-S until the business has been closed for good.  There should be a form 6252 equivalent in the 1120 program. 

3) Since future year APA proceeds will be treated as long-term capital gains am I still able to recognize the 2019 loss amount that was greater than my S-corp basis?  Since you are selling on an installment plan you will recognise the interest you are paid  and the portion of the gain is recognised in the same manner as in the year of sale.   If you have more questions on this I highly recommend you seek local professional guidance on this matter.