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Installment Sale Balance Sheet

pkcrossley1 — Tue, 24 Feb 2026 07:08:37 GMT

I sold my S-Corp's assets in 2022. The Equipment component was a cash sale and the Goodwill component was an installment sale covering 3 years. My question is what does my Balance Sheet look like at the end of 2022 (Year 1)? The company isn't operating anymore, so I am thinking that the only asset I have is the Installment Income Receivable? What about the offsetting capital entry?

Re: Installment Sale Balance Sheet

Anonymous_ — Mon, 14 Aug 2023 22:43:57 GMT

The vast majority of balance sheet issues are beyond the purview of this board and/or are not conducive to being resolved via this board's format.

I will page @Rick19744 and @Mike9241 for any further input.

Re: Installment Sale Balance Sheet

Rick19744 — Tue, 15 Aug 2023 14:59:47 GMT

I would strongly recommend you get some assistance from a tax professional. There are a number of issues that come into play here:

Did you have a plan of liquidation drafted prior to the sale of the assets?
Depending on the response to bullet number 1, this will / may impact how this transaction gets treated
If a plan had been drafted prior to the sale, you could distributed out the note receivable with no tax consequences and the balance sheet will be zero.
If you did not have a plan of liquidation, you will need to keep the S corp open while receiving the installment payments.
- You will have book and tax differences that need to be reflected on the tax return (timing).
- The reason you need to keep the S corp open, is that distributing a note receivable (installment note) that was entered prior to having a plan of liquidation, would be treated as a taxable gain; gain without the cash is not good.
- As noted in bullet 3, there is an exception to this rule if the installment sale was entered subsequent to a plan of liquidation and then the S corp liquidated within 12 months.
There could be other state issues that need to be addressed.
I don't recommend you handle this by yourself, as errors can be costly.
Make that appointment now, before the tax professional gets any closer to the 10/15 deadline (for individuals); and possibly 9/15 deadline depending on their practice.

Re: Installment Sale Balance Sheet

Mike9241 — Tue, 15 Aug 2023 05:51:00 GMT

if there was no plan of liquidation as described by @Rick19744 so that he S-Corp remains alive. in the simplest scenario (balance sheet) using tax basis accounting there would be the receivable, deferred gain (a liability) and offsetting amount in a shareholder equity account or accounts. if using proper accounting then only the receivable and equity. the gain recognized each year would be shown in the M-1 line 2.

oh and the S-corp return is due 9/15 not 10/15

the original due date of the S-corp return was 3/15/2023 the 7004, if filed, gives you a 6 month extension.

Re: Installment Sale Balance Sheet

pkcrossley1 — Tue, 15 Aug 2023 16:45:07 GMT

Thank you. This makes sense to me. The S-Corp was not liquidated. According to the Form 4797 I have a Deferred Gain of $131,360 (section 1231) at the end of 2022. My receivable is $250,00. How do I make it balance?

I understand that every time I receive an installment I make an entry on M-1 Line 2, per the Form 6252.

Thanks for the reminder about the September 15th deadline.