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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.
