Selling Business Question


L

Larry Wilson

I bought a business for $23,000. Sixteen years later I sold it for $29,000.
Considering that I spent at least $6,000 on new equipment and leasehold
improvements in those 16 years, can I expect that there will be capital
gains to pay when I file my 2003 income taxes? When I sold the business
part of the selling price included $1,000 for non-compete clause, and $2,000
for goodwill.
 
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B

Bob

Larry Wilson said:
I bought a business for $23,000. Sixteen years later I sold it for $29,000.
Considering that I spent at least $6,000 on new equipment and leasehold
improvements in those 16 years, can I expect that there will be capital
gains to pay when I file my 2003 income taxes? When I sold the business
part of the selling price included $1,000 for non-compete clause, and $2,000
for goodwill.

it depends - on what's in the business tax returns filed for the past
sixteen years and on how you sold it. you can save tax $$ by seeing a
local accountant !
 
P

Paul

Larry Wilson said:
I bought a business for $23,000. Sixteen years later
I sold it for $29,000.
That's great.

Considering that I spent at least $6,000 on new
equipment and leasehold improvements in those
16 years,

Much of which was depreciated or amortized during the last 16 years.

can I expect that there will be capital
gains to pay when I file my 2003 income taxes?

One can count on it.

If you purchased the stock of the company, then there would be a straight up
capital gain on the sale of the stock. This is regardless of what other
assets or what depreciation the business has taken.

If you purchased the assets of one business, and added to those assets by
buying other assets, then you have a smaller "cost basis" than that you paid
for everything, and as a result a gain on the sale of business assets.

When I sold the business part of the selling price included $1,000 for non-compete clause, and $2,000
for goodwill.
The non-compete is ordinary income, the sale of goodwill is a capital gain,
with a zero cost basis, unless you purchased goodwill when you bought the
business.

Your best bet is to seek out competent tax advise from a local CPA or EA who
can become familiar with your situation.
 
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S

Shagnasty

You may have depreciated out the entire original cost plus all the equipment
you bought, in which case the whole $ 29,000 might be taxable.

Take two asprin and call your CPA in the morning.
 

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