Sale of Business

[BrianM4]

I clicked the box for "I sold or disposed of my business in 2021" at the very beginning of the profile for my business in TurboTax Home and Business.  At no point in the remainder of filling out my information did it ask for the sale price or calculate the taxes owed on the sale of the business.  Am I using the wrong version of TurboTax or is it not possible to use TurboTax Home and Business when you get to the point where you sell.  The business is a Sole Proprietorship and the entirety of the sale was Goodwill based.

[ColeenD3 · Accepted solution]

You would include the sale in Sale of Business Property. 

Per the IRS, The purpose of filing the form is "Both the seller and purchaser of a group of assets that makes up a trade or business must use Form 8594 to report such a sale if goodwill or going concern value attaches, or could attach, to such assets and if the purchaser's basis in the assets is determined only by the amount paid for the assets."

This form is not available for electronic filing, so you will have to mail in your return.

Form 8594

To report the sale, follow these steps:

1) Wages and Income

2) Other Business Situations

3) Sale of Business Property

4) Other Property Sales

5) Select Sales of Business or Rental Property that you haven't already reported

[BrianM4]

Thank you! After looking at Form 8594 it's pretty straight forward.  Quick follow-up question: Do I have to snail mail the entirety of my return or can I file electronically and simply snail mail the Form 8594?  

[AnnetteB6]

Some IRS forms are able to be filed on their own without being attached to a return, but Form 8594 is not one of them.  You must file the whole return by mail to include Form 8594.

@BrianM4

[miok966]

Where is  "Net gain or loss from sales of business property" located at on turbotax business 2022?

[GeorgeM777]

In TurboTax Business the sale of business property is entered in the following manner: from Federal Taxes >>Wages & Income>>scroll down the screen to Business Items, then select Sale of Business Property.  On the screen that follows, you will have the following options to choose from: 

However, not all sales of business property are reported in this manner.  What type of business property did you sell in 2022?

@miok966 

[miok966]

The TurboTax Business that I have is desktop windows version. I do not see the Sales of Business Property section under Income. see attached photo. 

[miok966]

forgot to mention, its a retail laundromat business that i sold

[ThomasM125]

You would report the sale of the assets individually, in the Dispose of Business Property section. Then, the remainder of the proceeds (the goodwill) woud be reported in the Investment Income section, by using the Capital gains or losses menu option.

[miok966]

Where do I enter the Original cost? I acquired this business back in 2016. 

Thanks again.  

[KrisD15]

I have not seen that screen before, are you able to enter the dollar amount in the box that now says zero? 

Are you able to go back to the section where you reported the sale, and enter the original cost where it asks for "your basis" ?

Your basis is your value or cost. It would include what you paid for it and perhaps improvements. 

Improvements would be added unless you you listed them as individual assets. 

For example, if you paid 100,000 for the business, then added a 20,000 roof, the roof might be a 20,000 asset. 

If you paid 100,000 for the building and put on a 20,000 roof before you went into business, the basis of the building would be 120,000. 

If you bought the business only, no building, your basis is what you paid. 

[Rainycity91]

Hi, On calculating cap gains on the sale of a laundromat do you have to subtract any depreciation that has taken in past years?

[PatriciaV]

Yes, the adjusted basis of the building would include accumulated depreciation since inception. This asset should have been reported on the business tax return each year in order to claim depreciation expense. If you haven't used TurboTax Business before, you'll need to enter the assets and the accumulated depreciation for each before you report the sale.

@Rainycity91