Sale of LLC

[Jen16]

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.

[George4Tacks]

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

[TaxGuyBill · Accepted solution]

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@Jen16 wrote:

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

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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]

Thank you!