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Only asset identified in sale was inventory, will be subject to SE Tax - will assign FMV to the equipment. He had to split proceeds with ex wife, any way to mitigate the tax impact to him?
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If it is his business instead of jointly owned ------- no.
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Which came first, the divorce decree or the sale? What does the decree say? If the only asset identified in the sale is the inventory, why is there also equipment involved? Does the buyer know he's paying more for the inventory than the seller paid for it? If that's not a red flag, it's at least a raised eyebrow.
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Sorry it took so long to respond. Just heard back from the client. The divorce came after the sale. Now that I have the papers in hand, each one is responsible for their own share of capital gains.The sale included inventory at cost, $20K for F&F and the rest is "blue sky".
