I am somewhat confused on how this was handled based on my experience, but as in most cases, there can be different ways to handle the presentation, even if not technically correct.
- Based on the facts, essentially the business was sold if you sold all the assets; regardless of what assets there were. Additionally, you indicate you are filing a final LLC tax return, so the business is no longer a business and you are making liquidating distributions.
- Typically a noncompete is between a buyer and the owner(s) or key individuals; not the business. This noncompete is generally a separate agreement; but not always. Regardless, noncompete proceeds are ordinary income when received.
- I'm not sure that I understand the lease transfer. Not sure why there were purchase proceeds allocated to that. There are cases when a lease is transferred and there is some type of a premium received as a result of a change in lease payment, and those would most likely be reported in Class VI. That premium would be reported as ordinary income as well. But I'm not sure I have a good understanding of this component of the purchase.
- Without much more to go on, I would say both bullets 2 and 3 would be reported on form 4797 in Part II as ordinary income; just label them as described.
*A reminder that posts in a forum such as this do not constitute tax advice.
Also keep in mind the date of replies, as tax law changes.
