Sale of Business Property


D

DolphinVJ

As part of a partnership business sale, leasehold
improvements, franchise fees and inventory were assigned
values as part of sale price allocation which resulted in a
sales gain for each of this. From a seller's perspective,
where would the sale of each of this be reported, ie, on
Form 4797 (what section/part of From 4797), Schedule D,
etc.? Leasehold Improvement was originally on the Seller's
books and being amortized.
 
Last edited by a moderator:
Ad

Advertisements

M

Mark A. Hvasta, CPA

DolphinVJ said:
As part of a partnership business sale, leasehold
improvements, franchise fees and inventory were assigned
values as part of sale price allocation which resulted in a
sales gain for each of this. From a seller's perspective,
where would the sale of each of this be reported, ie, on
Form 4797 (what section/part of From 4797), Schedule D,
etc.? Leasehold Improvement was originally on the Seller's
books and being amortized.
Gain on Sale of:
Inventory will generate ordinary income
Leasehold improvements will generate Section 1231 gain
Franchise fee will generate capital gain
 
Last edited by a moderator:
D

DolphinVJ

Any ideas?

Thanks in advance for your input.
 
Last edited by a moderator:
D

DolphinVJ

Mark,

Thanks for you response.

If you don't mind, can you please clarify:

Inventory as ordinary income, will that be part II of Form
4797 or on Form 1065 as if sold in normal course of
business? (I do realize it was not normal course of
business)

As for Leasehold Improvements as a Section 1231 gain, would
that be on Part I of Form 4797?

Again, thanks.

Others are welcome to chime in as well. Any input will be
much appreciated.
 
Last edited by a moderator:
M

Mark A. Hvasta, CPA

DolphinVJ said:
Thanks for you response.

If you don't mind, can you please clarify:

Inventory as ordinary income, will that be part II of Form
4797 or on Form 1065 as if sold in normal course of
business? (I do realize it was not normal course of
business)
Inventory does not go on the 4797, the sale proceeds get
carved out and go on page 1 of the return as part of your
gross revenue as if it were from normal operations.
As for Leasehold Improvements as a Section 1231 gain, would
that be on Part I of Form 4797?
If the leasehold improvements are < 1 year in service, then
part II, otherwise, part III (pg 2 of the 4797) because
before you get to Section 1231 treatment (which gives you
capital gain treatment on the gain), there will be some 1245
and/or 1250 depreciation recapture to deal with.

Due to the complexity of issues involved in sellling a
business, I strongly suggest that you retain a competent CPA
or other advisor to assist you with preparation of the
required returns. The questions you're asking are among
some of the easier and more mechanical issues that can arise
in the sale of a business. While I am a CPA, the advice in
these new groups is no substitute for working with an
experienced professional.
 
Last edited by a moderator:
Ad

Advertisements

D

DolphinVJ

Mark,

Thank you so much for taking time from your busy schedule
and answering my questions in such detail.

Vijay.
 
Last edited by a moderator:
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

Top