The sale of $50,000 has to be designated to inventory and other items sold (if applicable). It would seem you didn't own the building or a shop where you operated your business based on your comments, or it was not part of the sale.
You state you only owned inventory at a cost to you of $4,000. You have to decide how much of that selling price was for inventory and how much may have been for your other things such as a covenant not to compete or goodwill or a customer list. These other assets I have mentioned are intangible.
The typical way the to handle business goodwill is by subtracting the fair market value of the business tangible assets from the total business value.
Your buyer must treat the purchase they way you treat the sale. Allocating too much to inventory (more than what you paid for it) will be a tax disadvantage to you because it would be taxed at your regular tax rate. Other assets will have a better tax rate with the exception of any depreciation recapture.
The sale of inventory takes place on the Schedule C. It never changes character during a business sale.
The sale of any other asset (tangible or intangible) takes place on the sale of business assets section.
- To record the sale of the inventory/cost of goods follow the instructions here in TurboTax Self Employed:
- My Account
> Tools > Topic Search > Type
business > Go
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Continue to enter the amount of the proceeds that applies to inventory
- To record the sale of business assets follow the instructions here in TurboTax Self Employed:
- My Account > Tools > Topic Search > Type sale of business > Go
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Continue to enter the other business assets
- Click the screenshots attached to enlarge and view for assistance.
