Sale of Business

[Ghost-Tax]

Quick summary: a person sold their business for a total of 100k.  They only received 80k and the remainder of the 20k will be paid in installments (seller finance).  I came across different opinions on how this is done on a tax return and I would love your input on the issue.  My initial thought was that the person should include the total amount for the sale of the business and then in the following years they will include the interest received from the installments.  I've also read that the gains can be spread out also: the person should include only 80k (the money received for the year) and then each year the installment agreement should include 1.interest income, 2.return on basis, 3.gain on the sale.  

So please, any feedback is valuable and greatly appreciated.

Thank You

[PhoebeRoberts · Accepted solution]

Both of those methods are acceptable.

[George4Tacks]

As stated, both are acceptable. You, as a paid professional, should determine which is the best tax strategy. All at once, or spread over several year? To spread, you will need to file 6252 each year. Regardless of method, you need to file 8594 in the year of sale. 

Carefully look at this year's income and what the projected other income will be for the next x years. 

[Ghost-Tax]

I can't remember the last time I did a 6252.  In this sale of business there is no property or anything.  In Part I I put the selling price (line 5), then the basis (line 8), then the dates when it was acquired and sold, but where do I put the amount received at the time of sale? They got 80k in 17 and then the remainder of 20k they will receive in 5 years.  Thank you.

[George4Tacks]

Sorry, I don't speak ProSeries. Maybe the answer is here https://accountants-community.intuit.com/articles/1613267-proseries-form-6252-faq-s

[Norman2001]

Agree that both methods are acceptable.  A good reference is IRS Pub 537, Installment Sales.