Sold Business - Sole Proprietor, No goodwill, Has inventory sale to report, Section 179 F&E, and selling price, I am having hard time to figure out where to report each of the items.

[sukhdeepchauhan]

Hello All,

Any advice will be appreciated, I have used turbo tax for 14 yrs for filing the taxes, but this time around it is different as I have sold the business.

Here's the criteria: Federal and California State return

Sold Business - Sole Proprietor, No goodwill, Has inventory sale to report, sold F&E, Section 179 F&E, and selling price.

Where do you report each of the items in turbox tax?

Are there any additional forms I have to manually download/print outside of turbo tax?

Thank You

[Carl]

At the beginning of the business section one of the screens has a selection on it for "I sold or otherwise disposed of this business in [tax year]. You must select that option and press on "as if" you still own the business.

WHen you get to the business summary screen, you have to work through income and expenses, even if those amounts are all zeros.

Next, you must work through the Business Assets section, and if any assets are listed there you must show your disposition of each and every asset one at a time. Start working through the first asset and on the screen that ask, indicate that YES you DID STOP USING this asset in [tax year]. Then continue working the asset through to report it's disposition - be it sold, removed for personal use, given away, stolen, destroyed, whatever.

Note that you must show your disposition for each and every asset listed, individually.

After you're finished with all the assets, if your business claimed ANY vehicle use at ANY time you were in business, then you will need to work through the business vehicle section to show the disposition of the vehicle - even if that vehicle was a personal vehicle not used 100% for the business. Most likely, your disposition of the vehicle would be "removed for personal use", beucase while not unheard of, it's rare that the sale of a business reported on SCH C would include the vehicle in that sale too.

Finally, if your business carrys inventory and you still have unsold inventory, then you must make your EOY inventory balance $0. To do that, on the COGS screen simply indicate that all remaining inventory was “removed from the business for personal use” and this will make your EOY Inventory balance $0. If you sold the inventory as part of selling the business, then you would report it as such by making the COGS amount equal to the amount you paid for that inventory. Then you'd have to report the same amount as business income in the business income section. Subtract that amount from your business sale price, and it all works out in the wash.

Once you've completed all the above, just work it through to the end, and this will be the last year you file a SCH C for this specific business that you no longer have.

[sukhdeepchauhan]

Thank You Carl, to taking time to answer, I do have follow-up questions highlighted in red.

At the beginning of the business section one of the screens has a selection on it for "I sold or otherwise disposed of this business in [tax year]. You must select that option and press on "as if" you still own the business. - Done

WHen you get to the business summary screen, you have to work through income and expenses, even if those amounts are all zeros. - Done

Next, you must work through the Business Assets section, and if any assets are listed there you must show your disposition of each and every asset one at a time. Start working through the first asset and on the screen that ask, indicate that YES you DID STOP USING this asset in [tax year]. Then continue working the asset through to report it's disposition - be it sold, removed for personal use, given away, stolen, destroyed, whatever. - Done section 179 items

Note that you must show your disposition for each and every asset listed, individually. - Done section 179 items

After you're finished with all the assets, if your business claimed ANY vehicle use at ANY time you were in business, then you will need to work through the business vehicle section to show the disposition of the vehicle - even if that vehicle was a personal vehicle not used 100% for the business. Most likely, your disposition of the vehicle would be "removed for personal use", beucase while not unheard of, it's rare that the sale of a business reported on SCH C would include the vehicle in that sale too. - On Vehicle screen where it ask you "You started using it as personal vehicle 100%, Your percentage of business use, You gave it as gift" etc. I choose "None of these apply" and went through next screens where it ask for Sales Price, Basis for gain/loss (Turbotax instructions tell me to leave it blank if you still have the vehicle, not sold and using it for personal use) and screen for calculate depreciation equivalent.

Finally, if your business carrys inventory and you still have unsold inventory, then you must make your EOY inventory balance $0. To do that, on the COGS screen simply indicate that all remaining inventory was “removed from the business for personal use” and this will make your EOY Inventory balance $0. If you sold the inventory as part of selling the business, then you would report it as such by making the COGS amount equal to the amount you paid for that inventory. Then you'd have to report the same amount as business income in the business income section. Subtract that amount from your business sale price, and it all works out in the wash. - What is COGS screen? It did not ask me for EOY inventory maybe because I selected "I sold or disposed the business".

Then you'd have to report the same amount as business income in the business income section - How do you do this?

My business sale price = Inventory amount + F&E and (No goodwill charged)

Sold Inventory as part of sale, the inventory amount will be considered as income? Where do you input that? or Turbox auto-calculate/input it?

[Carl]

On Vehicle screen

Either you sold the vehicle as a part of the business sale transaction, or you did not. There is no grey area here. If you did not sell it as a part of the business sale transaction, then it was removed from the business for personal use.  Even if you sold the vehicle as it's own separate transaction which is not dealt with at all, in the business section.

What is COGS screen? It did not ask me for EOY inventory maybe because I selected "I sold or disposed the business".

Actually, COGS (Cost of Goods Sold) is a section, not just one screen. If your business carried inventory, then your End of Year (EOY) Balance must be zero upon disposition of the business. It is not considered as completely disposed of, until then.  If your business never reported inventory, there's no need to work through that section.

My business sale price = Inventory amount + F&E and (No goodwill charged)

Sold Inventory as part of sale, the inventory amount will be considered as income? Where do you input that? or Turbox auto-calculate/input it?

Just report your inventory sold "at cost". The amount you sold it for would be entered as regular business income. Then subtract that business income amount from your sale price, so you're not taxed on it twice. You won't be taxed on it at all, if sell it for what you paid for it. the "Cost of Goods Sold" amount will basically "cancel out" the taxability of the amount you entered/included as business income for that inventory.

[sukhdeepchauhan]

Thank You Carl, I appreciate your effort to help me out.

I decided to just go with Turbo-tax Full service to handle my taxes this time, just to make sure done right way.