S-Corp Dissolution

Forum|Forum|3 years ago
March 1, 2023
2 replies
33 views

Client sold a grocery business operated under S-Corp. on 11/30/22 for $10,000.

Their balance sheet on the last day: cash 54,414, inventory 19,414, loans from shareholders 13,737, capital stock 40,006, retained earnings 19,736.

Please help me how to process transactions in ProSeries professional to dissolve the S-corp and realize loss of sale.

Thanks

ProSeries Professional

This topic has been closed for replies.

dascpa

Level 11

Look at the contract of sale for the allocation of price breakdown. File Form 8594. Take some continuing ed classes on the subject. If you understand the concepts, that makes the tax return input so much easier.

dkh

Level 15

Let's start with the $10,000. What is the breakdown - inventory, ~~assets~~ equipment (which you did not mention being on the Balance Sheet ), Goodwill ?

edited

IRonMaN

Level 15

Pesonally I've been looking for a sweetheart deal like that. Buy 54,414 of cash for only $10,000 and have them throw some inventory in for good measure. Heck of a deal. Now if the inventory was all Dove chocolate this would be a grand slam 😀

Slava Ukraini!

dkh

Level 15

You really should not be handling this client.

But if you start with (example) $20,000 beginning of year inventory, add $30,000 of purchases you have $50,000 goods available for sale. At the end of the year you have -0- in inventory you have a $50,000 costs of goods sold. If the selling price of the inventory was $10,000 your gross profit is $10,000 - $50,000 = <$40,000>. you've reported the loss.

Alternatively, you can leave sales and costs of sales out of the entire equation for the sale of the business and only use it for normal day-to-day operations. On Form 4797 under ordinary gains and losses you can report the $10,000 sale of inventory and $50,000 cost of inventory for a $40,000 loss.

Both methods yield you the same result. But since you have to report on Form 8594 the breakdown, the 4797 method will match the 8594.

@dascpa said You really should not be handling this client.

I second that.

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