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See what's trending for the November 15th deadline (Form 990) and resources for the upcoming tax season. View ProSeries Hot Topics.
See what's trending for the November 15th deadline (Form 990) and resources for the upcoming tax season. View ProSeries Hot Topics.
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Sale of Business
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jkreuz2
Level 1
04-09-2024
12:47 PM
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Client sold business 03.31.24 but received partial payment in 2023. When is he taxed? In 2023 or 2024 when actual sale occurs?
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2 Comments 2
sjrcpa
Level 15
04-09-2024
12:51 PM
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Installment sale reporting can be used, but all ordinary income is taxable in the year of sale, even if no money was received.
EDIT: I just looked at your dates. So they got a "good faith deposit" in 2023 and actual sale occurred in 2024?
The more I know, the more I don't know.
dascpa
Level 11
04-09-2024
12:55 PM
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Prior answer is correct. Always look to the "legal" side of a deal. The sale was in 2024. Therefore any transaction in 2023, unless listed as a partial sale in the contract (like they sold certain assets in 2023 and the rest in 2024) would be a down-payment, a deposit towards the eventual sale. This is where cash basis is not correct on reflection of taxable income.
