Sale of LLC - how do I report

[ChristineBala]

Hi, 

We sold our LLC partnership for 150k The proceeds are allocated among

Furniture and fixtures 10k (which are partially depreciated)

Goodwill 20k  (which is also partially amortized)

Leasehold imp  5k (nothing listed on our previous returns)

Tradename 5k (no asset listed on our prior return)

Covenant not to compete 20k 

Inventory 5k

The rest is not allocated to any certain items and just a part of the purchase price. 

It is an installment sale over 3 years and in the first year only the deposit of 10k and another 10k was rec'd. The rest will be received this year and next year. 

QUESTIONS...

Where do I report the sale?

Do I report any on my business return since the assets are listed there? Or do I report on my personal return? 

Do I need to report each asset separately? 

I am marking "final" on our business tax return so I am confused if I have to report there? 

HELP!! and THANK YOU!

[Rick19744]

You have a number of issues that need to be addressed:

1. First and foremost, the buyer and seller must both complete form 8594.  Each will need to include this form as part of their respective return.
2. https://www.irs.gov/pub/irs-pdf/f8594.pdf
3. https://www.irs.gov/pub/irs-pdf/i8594.pdf
4. Based on your initial facts, the buyer and seller need to do some additional work as to the purchase price allocation.
5. Once the purchase price allocation has been completed, you will then need to enter the information into TT as if you sold each item.
6. The one question that I have is what goodwill is being amortized?  Is this something the LLC purchased?
7. For the $$ involved, I would recommend that you consult with a tax professional to make sure you are handling the reporting correctly.
8. The other issue to be careful of, is when you complete the installment sale form, all depreciation recapture is recognized in the year of sale.  There are many times when this catches sellers off guard and they do not receive sufficient funds to pay the tax on the recapture.  Another reason to get some professional assistance.

[ChristineBala]

Thank you so much for the reply.  Great advise. 

Can you tell me if the sale needs to be included on the LLC tas return or the personal. 

I am wondering becuase the assets were depreciated on the LLC return first but we are closed the LLC and 2019 will be the final year. Do we do part on the personal and part on the LLC or all of the sale on one of them? 

Thanks so much

[Rick19744]

In general, the sale of the assets will be reported on the LLC return, which then as you know, is reported on the K-1 which each member will receive.

There are also issues related to the timing of the installment sale and the liquidation of the LLC.  This is another reason to consult with a tax professional where you can have a one on one discussion of all the facts.