Sign Up

Why sign in to the Community?

  • Submit a question
  • Check your notifications
or and start working on your taxes
cancel
Showing results for 
Search instead for 
Did you mean: 
bmanthy
New Member

Where to enter purchase price of a business I bought?

 
6 Replies
bmanthy
New Member

Where to enter purchase price of a business I bought?

This is a Single Member LCC that I purchased from the previous owner for $20,000.  Perhaps this is not deductible?
Carl
Level 15

Where to enter purchase price of a business I bought?

You'll deal with this on SCH C as a part of your 1040 personal tax return. Begin under the Business tab in the Business Income & Expenses (SCH C) section and work it through. Your purchase price will be dealt with in the Business Assets section. Any physical assets included with your purchase are entered there and will be depreciated over time. For the most part, business assets are depreciated over 39 years. But there are some types/classes of business assets that depreciate faster over a shorter period of time.
Non-physical assets you paid for, such as good will or customer lists for example are not capitalized and depreciated over time. Instead, they are amortized and deducted over time - generally the deduction for an amortized asset is spread out over 15 years, and if you have the business income in the first year, you can deduct a maximum of $5K for your amortized assets in that first year if certain specific criteria are met and satisfied.
So physical assets that you paid for are capitalized and depreciated over time, while "some" non-physical things you paid for are amortized and deducted over time.
bmanthy
New Member

Where to enter purchase price of a business I bought?

Fantastic!  Thank you.
TaxGuyBill
Level 9

Where to enter purchase price of a business I bought?

If you are a Sole Proprietor (Schedule C) and the purchase included "Goodwill", TurboTax does NOT have the proper forms to record the purchase or sale of a business.
Carl
Level 15

Where to enter purchase price of a business I bought?

There's no such thing as a "purchase price" for a business per-se. But how you deal with this on your tax return depends on what type of business you bought. Please read the below definitions of the most common business types, and let us know what you have here. We'll also need a bit more detail on what this business does. Sell product? Manufacture product? Provide services? Something else more definitive?

Sole Proprietorship – This is a business with one owner, and only own owner. There are no other investors or share holders. This type of business is considered a “disregarded entity” by the IRS. All income and expenses for the business are reported  on SCH C as a physical part of the owner’s personal tax return. Again, a sole proprietorship has only own owner. Depending on what state the business is in, registration is not required at the state level. But it may be required at the county, town, or other level of government below the state. For example, your county may require you to register and obtain a county issued Occupational License, which authorizes you to conduct business only within the jurisdiction of the authority that issued the Occupational License. This is most often required when the county, city or other authority below the state taxes personal income or imposes a tangible property tax on business assets utilized to produce business income.

Single Member LLC - This is a business with one owner, and only own owner. There are no other investors or share holders. This type of business is considered a “disregarded entity” by the IRS. All income and expenses for the business are reported  on SCH C as a physical part of the owner’s personal tax return. Again, a single member LLC has only own owner. This type of business is required to be registered at the state level, weather that state taxes personal income or not.  Additionally, this type of business may also be required to obtain an Occupational License for the county(s), city(s) or other more localized jurisdictions within that state, in which the business will be operating in.

Multi-Member LLC – This is a business with more than one owner.  It’s also the exact same as a Partnership (for tax purposes) This type of business also has to register at the state level, and may also be required to obtain an Occupational License from more localized jurisdictions within the state, in which that business will operate.  This type of business will file its own physically separate tax return with the IRS (and state if applicable) referred to as a Partnership Return, on IRS Form 1065. When completing the 1065 (using TurboTax) the business will issue each individual owner a K-1 reporting the income (or loss) of each owner. Each owner will use this K-1 to complete their personal return. So an owner can’t even start their personal return, until after the 1065 Partnership Return has been complete, filed, and all K-1’s issued to all owners.

LLC “Like an S-Corp” – For tax purposes only (and I reiterate: FOR TAX PURPOSES ONLY!!!!!) one can elect to have the IRS treat their single member LLC or multi-member LLC “like an S-Corp” ****FOR TAX PURPOSES ONLY!!!!!****  This means your business is treated like and considered to be a physically separate taxable entity. This is accomplished by filing IRS Form 8332 – Entity Classification Election. This allows you to act as if your single member LLC or multi-member LLC is an S-Corp. But understand that if you want the IRS to treat your LLC like an S-Corp, then the business “must” act like an S-Corp, and follow all the laws, rules and regulations required of an S-Corp by whichever state your LLC is registered in. All business income and expenses is reported on IRS Form 1120-S – Income Tax Return For An S-Corporation. The S-Corp will then issue each owner, investor and/or shareholder a K-1 which they will need before they can even start their personal tax return.  Unlike a single member LLC which is considered a disregarded entity for tax purposes, an LLC that has filed form 8332 – Entity Classification Election  “is” considered and treated like a separately taxable entity.

S-Corp – This type of business is registered at the state level and must conform to the laws, rules, regulations and ordinances of that state which apply to an S-Corp. All business income and expenses is reported on IRS Form 1120-S – Income Tax Return For An S-Corp.  The S-Corp will then issue each owner, investor and/or shareholder a K-1 which they will need before they can even start their personal tax return.  Unlike an LLC which is considered a disregarded entity for tax purposes, an S-Corp  “is” a separately taxable entity, and therefore files its own physically separate tax return and issues K-1’s to all owners, officers, investors and shareholders.

C-Corp - This type of business is registered at the state level and must conform to the laws, rules, regulations and ordinances of that state which apply to a C-Corp. All business income and expenses is reported on IRS Form 1120 – Income Tax Return For A C-Corp.  The C-Corp will then issue each owner, investor and/or shareholder a K-1 which they will need before they can even start their personal tax return.  A C-Corp  “is” a separately taxable entity, and therefore files its own physically separate tax return and issues K-1’s to all owners, officers, investors and shareholders.

Anonymous
Not applicable

Where to enter purchase price of a business I bought?

purchased the stock in an existing corporation - amount is not deductible. 

Dynamic AdsDynamic Ads
Privacy Settings
v