USA Receiving Tax Credit After the Sale of the Business


Joined
Sep 30, 2021
Messages
3
Reaction score
0
Country
United States
My client is expecting a large ERC payment by the end of the year. The problem is both partners in this C-corp are looking to sell the business. The sale is most likely going to close before the ERC money hits the bank. I’m not sure how to account for this money making sure the current partners get it and it doesn’t go to the new buyers. Typically, without the sale, I would

  1. Journal Entry 01
    1. Cr: “Other Income” (because ERC is taxable)
    2. De: “Due from ERC” (asset account)
  2. Journal Entry 02 (When the money arrives)
    1. De: “Bank Account”
    2. Cr: “Due from ERC”
  3. Journal Entry 03 (when the money is removed from the bank)
    1. Cr: “Bank Account”
    2. De: Whatever they do with the money like “Partner div” or “payroll” or whatever
However, this sale of the business is throwing a wrench in my spokes. They want to account for this money on their 2021 Tax return so that it’s already accounted for during the sale of the business, that part is easy. It’s the “money hitting the bank after the sale of the business” that I’m not sure how to handle.

Ideally, I’d like to make a liability account labeled “Loan from Seller” so when the ERC money hits the bank account it’s then used to pay off that loan account and everything gets Zeroed out. I’m not sure how to create the “loan to seller” account cause I can’t figure out what the other side of that journal entry would be.

I’m open to any and all suggestions. Please and Thank you.
 
Ad

Advertisements


Ask a Question

Want to reply to this thread or ask your own question?

You'll need to choose a username for the site, which only take a couple of moments. After that, you can post your question and our members will help you out.

Ask a Question

Similar Threads


Top