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Installment Sale

Level 3

I have a client that sold their business.   $300,000.   $60,000 for assets, $10,0000 non compete, $230,000 good will.  Installment sale .    doing this in 2019 Lacerte.  

Installment sale- received $ 84,964.56 received 1st year.

I am filling out the depreciation page and not getting it to work, and am hoping someone can let me know what I am doing wrong. 

Assets have a basis of $ 36,534.00 , sold for $60,000- so there is a recapture of $23,466.00 that needs to occur.   ( total assets were $ 237,719, Accumulated depreciation $ 201,185).  $ 175,014 was section 179, 10,328.00 was bonus and 15,843.00 was normal depreciation).  I did remember that  all the gain needs to be recognized this year as it is recapture.  The K-1 supplemental information is stating:   Sale price correctly, the cost correctly, the section 179 previously reported correctly,  but is stating depreciation allowed or allowable as $ 26,172.00.  Shouldn't this be $23,466?     

Then if  I allocate $60K of the $84,964.56 received this year to the asset sale, that leave $24,964.56 that I can allocate to Good will and Covenant not to compete.   Goodwill will go as a capital gain and the covenant not to compete will go as ordinary income.     Do I set up 2 installment sales? ( one for goodwill and one for the non compete) or can they be combined into one? 

I believe I would enter both the Goodwill and Covenant not to compete on the disposition page.

I want to thank you in advance for any insight you can give me, is greatly appreciated.


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1 Comment 1
Level 15

I am inferring that you are doing a 1065, since you mention K-1, so my answers will refer to partnership screen numbers.

1. Be sure to do Screen 52 to include Form 8594 - "if  I allocate $60K of the $84,964.56 received this year to the asset sale" - WHAT DOES THE SALES CONTRACT SAY?

2.  I think you may need three installment sales, Assets (4797) - Goodwill (Sched D Cap Gail) - Covenant NTC (Ordinary income)

3.  "I am filling out the depreciation page and not getting it to work" Is this the first year this return is in Lacerte? Are you entering the sale through the depreciation Screen 14?  Answering this will help to answer the discrepancy. 

4. Yes, Goodwill and Covenant go separately in screen 19.


Here's wishing you many Happy Returns