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Sale of LLC

Jen16
Level 2

I have a client who sold their landscaping business in 2020, I am wondering how to classify the income he received that is associated to the client base and existing accounts.  Basically the business was around for several years, had a bunch of current and recent clients, plus the trucks and equipment.  So I have the vehicles and equipment all set but not quite sure how to classify the remaining sales income that would cover the existing client accounts.  Thanks.

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Accepted Solutions
TaxGuyBill
Level 15

@Jen16 wrote:

how to classify the income he received that is associated to the client base and existing accounts. 


Sale of a client list/goodwill/ongoing concern is a capital gain.  So you create an Asset Entry Worksheet with $0 of Basis, and report the sale in the disposition area.

As George mentioned, be sure you fill out Form 8594 to show the allocation of the assets.

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3 Comments 3
George4Tacks
Level 15

What does the sales agreement say? How are you going to complete the Form 8594? 


Answers are easy. Questions are hard!
TaxGuyBill
Level 15

@Jen16 wrote:

how to classify the income he received that is associated to the client base and existing accounts. 


Sale of a client list/goodwill/ongoing concern is a capital gain.  So you create an Asset Entry Worksheet with $0 of Basis, and report the sale in the disposition area.

As George mentioned, be sure you fill out Form 8594 to show the allocation of the assets.

Jen16
Level 2

Thank you!