I owned a clothing consignment business, I sold the business for 50,000 but only owned inventory of 4,000.
I am unclear as to how and where I put that. Also during review its asking me for depreciation and I am not sure what to put in that. I really could use some help on this part of my taxes please. Thank you
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.