Instructions for entering S Corp asset sale

[david3]

Are there any PS instructions for entering an asset sale in Form 1120S? My search hasn't found anything.

I'm trying to determine the mechanics of recording the sale of inventory so that the tax treatment is correct and separated from the fixed asset gain, goodwill, etc. 

Thank you for your help.

[sjrcpa]

Sale of inventory is Page 1 income and there is COGS.

[david3]

Thank you. 

I forgot to mention that this is also an installment sale. 

How is goodwill entered in PS?

Thank you. 

[sjrcpa]

Can't report ordinary income on installment basis. All taxable in year of sale.

I don't use ProSeries so can't help with that.

[TaxBandit]

Is this an asset sale or sale of inventory?  You mentioned both terms.

Asset sale is entered in the asset entry area under dispositions. 

Inventory sale is listed as ordinary income.

[david3]

Thank you for helping with this.

It's an asset sale with a partial payment and a buyer note.

The purchaser is buying AR (seller uses the accrual basis), inventory, fixed assets, and goodwill, customer/vendor list, digital art, and domain name. There is a lump sum total for the goodwill and other intangibles. The other intangibles are not on the seller's balance sheet.

I already entered the sale of fixed assets on each asset's disposition section.

I think I am getting hung up on everything being included in the gain - AR, inventory, and goodwill. That's why I was asking where these items are reported in PS so that the K-1 includes the correct information for the gain from the asset sale. Also, that the Form 6252 includes the correct profit %.

I appreciate your help.

[sjrcpa]

Don't forget the 8594.

[david3]

Yes, I have that covered. Thanks.

So, since AR and inventory purchases are included in normal operating profit, are only the fixed assets and goodwill purchases included in the gain calculation and the profit % for F 6252?

Thank you.

[sjrcpa · Accepted solution]

Yes.

[david3]

Thank you, everyone, for your help.

[david3]

Ok, I'm getting back to this S Corp client's tax return who had an asset sale during 2024.

Asset sale consists of the following:

$50K AR

$114K Inventory

$15K Equipment

$440K Goodwill

$619K Total Purchase

$454K Buyer note

$104K Cash Received

$61K Broker Commissions

$619K Total

It's looking like only the $440K Goodwill will qualify for the installment sale treatment. Sec. 179 deduction was taken on most of the equipment and all equipment sale price is subject to depreciation recapture.

Given this, is the $14K difference between the $454K buyer note and the $440K installment agreement, reported as another note held by the H&W shareholders? Therefore, two notes will be distributed to the SHs and reported on their F 1040 in 2025 and future years?

Thank you.