SALE OF GOODWILL OF VETERINARIAN PRACTICE ON SCH D OR 4797?

Forum|Forum|6 years ago
December 7, 2019
8 replies
48 views

Any difference in tax if it goes through 4797 to Sch D long term gain? Is it subject to the NIT?

ProSeries Professional

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Best answer by Ephesians3-14

This is a taxpayer selling the ASSETS or stock of the vet practice? I assume assets. Please confirm.

itonewbie

Level 15

@Greta This is related to your previous question. Instead of asking what if, have you determined the character of the income based on our discussion? We can then come back to this new question of yours.

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E

Ephesians3-14Answer

Level 7

This is a taxpayer selling the ASSETS or stock of the vet practice? I assume assets. Please confirm.

G

GretaAuthor

Level 7

Sole Proprietor selling equipment, inventory, goodwill, and Covenant not to compete, evaluated/agreed by buyer and seller for price per category. They agreed to make the goodwill worth almost 1/2 mil, equip 65K, a small amount for inventory, and 10K for CNC. I entered equipment individually on asset worksheets, inventory into Sch C income, goodwill on long term 4797, and CNC on short term 4797. Does this seem OK? Proseries charged a hefty investment tax on sales of Goodwill and the CNC.

itonewbie

Level 15

A bit unusual for a vet to operate as a sole proprietorship but I guess it is what it is.

It is established that CNC is ordinary income and it would be right to report it in Part II of F.4797. It should not be subject to NIIT.

Prima facie, goodwill is subject to NIIT pursuant to §1411(c)(1)(A)(i) and §§1.1411-1(d)(11) unless an argument can be made in reliance on §§1.469-2T(c)(7)(i).

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E

Ephesians3-14

Level 7

Hmmmmm...my understanding was that only net gain which is NOT attributable to an ACTIVE trade or business (that is, passive activities) is subject to NIIT. So if she was actively involved in operating the business, then the sale of goodwill would not be subject to NIIT.

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