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I did not prepare anything for this client when this sale occurred. All I have is the originally filed tax return. The tax return shows the sale was reported on from 4797 from the K-1 information. Therefore, it appears the client did elect out of the installment sale. The gain was reported in the year of the sale. I do not have any of those calculations. At this point, I will ask the client for the worksheet, statement or whatever they have that shows the calculation. I did ask how the gain was determined. The response was the gross sales minus the investment for both tangible and intangible items, re-captured depreciation; etc. So the facts that I know, the seller opted out of the installment agreement due to the sale being reported on form 4797 and not form 6252. I know the terms of the sale, sale price, and terms of the sale. I don't know how the original gain was calculated. I do know it was a capital gain and by the Pub it should be a capital loss. A lot of extra work still needs to be done here.

Assuming the client didn't elect out of installment sale reporting, please see IRS Pub 537 for installment sale reporting where price has been reduced. You will have a recalculation of the gross profit. There is also a section in the pub that deals with repossessions and recalculating those amounts and how to report that portion of the transaction going forward.

It seems to me to be an amendment of the 2021 tax return.

Asset sale. Including all tangible and intangible items.

For some clarity. Information in the "cloud" is not any better or worse because of the location. Actually, it is a good thing to have a secure backup of your data online, in a few places - for the day then your machine fails or walks away, or worse yet, when a computer "tech" messes it up while "fixing" it. It is a rare and likely extinct person who manages local backups properly, such as making rotation sets, both for at the desk, and moved and rotated to a couple of secure alternate locations. I am one of those who no longer manages local backups as a proper only method, as I work at home, and my former office was too close to be out of the same natural disaster area. One of the server locations I use is a very secure facility with restricted access, armed guards, etc. It is not uncommon and is actually expected for major server farms. It is also at a specific place where many different major fiber carriers intersect (and a good tech population to draw employees from). I cannot remember any offline issues for more than a few minutes (while they swap to a reserve connection or something). They have multiple days of power self generation at the ready at all times. There is at least one local fiefdom which set a rule that all records and data must remain within the boundaries of their fiefdom, but I doubt anyone follows that rule. On the other hand, if your only working data is online, and it is for accounting and/or payroll, I have yet to see one which would satisfy me. Why? 24/7 access is impossible to guarantee, and outages happen at least once a year, sometimes for 24 hours or more. I am a firm believer there is no such thing as an accounting emergency, so all should be able to handle such a payroll outage with either paper checks and a pen, or with cash. Even with local data, paper checks and cash access should be considered and planned for as a backup. The other issue with online is even I can type faster than online data can keep up. I am sure online providers use tricks like caching and such, but those don't fly for me. I actually deal with this when I am lounging in our hot tub, over my own connection, let alone a remote connection of some sort. I am of the belief when I hit a key, it should be saved, period. Computers are well fast enough to do so. Online cannot keep instantly updated, so they often work like the old days, where you have to click something to trigger a save then wait. (A few still ask me where our save button is, or how to save the data before they close the software.) There is also a significant cost to offer live online storage, there is a charge for bytes up and down, as well as storage size, redundancy, etc. Server space and pipes are not free. What do I think is ideal (and what we will eventually release in the next 12 months or so)? Hybrid. data stored securely online, downloaded to the device for use, then uploaded securely for storage. Also with a local copy, securely stored, which can be used if online access is not possible. For those who what to change any software to something else, one cannot only look at the price itself, there will be a learning curve, extra uncompensated time spent learning/moving/adjusting, as well as keeping the current system in place for some time period for safety. I don't know what the magic number of cost % is, but it should not be ignored. Thus a comment like sticking with X for another 2 years until retirement is a very wise decision.

Did they sell the stock or the assets?

Client sold their business to an unrelated party in 2021. The business was an S-Corp and gain in the amount of $255,918.00 passed through to the single shareholder and reported on the 2021 individual tax return as a capital gain. The business is closed as expected and a final year tax return has been filed. The initial purchase agreement contained a balloon payment totaling approximately 500K to be paid sometime in 2022 to the shareholder. The buyer failed to make the ballon payment. An agreement was drawn up that reduced the amount due to the seller to $369,069.00 plus $8,003.00 in interest to be paid in 2023. The buyer once again failed to make the agreed upon reduced payment. The reduced agreement gave the shareholder the right to seize any equipment. I am still gathering those amounts. Because the buyer defaulted on the initial required balloon payment of 500K Is the 500K the starting point to calculate the loss or the reduced agreement amount? Also, shouldn't the value of the equipment recovered be used to offset some of the loss? I am also taking the position this transaction is a capital loss. Is my thinking correct? Any assistance is greatly appreciated.

Are you doing any payroll? Do you need to convert all your historical data or could you do a JE at YE to bring over your balances and start from scratch? Tom Longview, TX

I agree, I have done in depth reviews of Medlin in the past and it should do everything you need. I need some bells and whistles for my larger business clients which Medlin won't do so I don't use it. Also you might look at "myob"

I agree. My largest client did receive a 3 page letter from their attorney back in January.

I'm paying out the whaa zoo for QB. I guess I'll keep paying for a few more years, then it's over for me.

I thought there was some holdups too. So I'm waiting for later in the year. I'm not recommending anything to clients now. I suspect most of them don't know anything about it.

Check out Medlin Software. Dennis is a frequent poster on here.

I’ve been using QB the last few years, but pretty much refuse to pay $650 for a year’s subscription or $30/mo per company for QBO. I also don’t like any of my info being ‘in the cloud’. I have 2 businesses: my tax biz and 3 rental properties. The rental properties have assets & contraassets, income & expenses. The tax biz has income & expenses. I do like to be able to book a sale as it happens and record the income as it comes in. Nothing complicated at all. Does anyone have any recommendations for me? QB shut me out of a client’s copy I was using in March and when I called today wasn’t very happy with the results. I guess I would go online with Xero or something like it if it was cheap enough.

I knew a SMLLC could be a Sub S shareholder but never imagined, or heard of a corp owning a SMLLC. Maybe there is a legal purpose, but for tax and accounting I don't see any advantage since it goes back the the owner's tax return.

https://www.thetaxadviser.com/issues/2023/jun/single-member-llcs.html

Two screen shots:

Judy, thank you so much. That pretty well answers the question. Apparently the ordering rules are: Reduce the Earnings and Profits to the extent they exist at year-end. Reduce the Basis Report Capital Gains Great link also. Ron J.

Please post a source, I don't think I have ever seen this before?

I don't know why things have to be so complicated. I shall proceed.............

Transfer all of the assets into the surviving LLC, re-title if need be. Transfer the cash into the surviving LLC's bank account. Assume any liabilities. Close the old LLC.

According to multiple sources : "If the single-member LLC is owned by a corporation or partnership, the LLC should be reflected on its owner's federal tax return as a division of the corporation or partnership."

"Since SMLLCs are ignored for tax purposes, why not just transfer one LLC into the other and just have one entity" How exactly do I do that?

A SMLLC owned by a Sub S? I don't think it works that way; a disregarded entity owned by a corporation?

Have you actually tracked E&P each year and know what the accumulated E&P is? Dividends are first paid out of current and accumulated earnings and profits. Current year E&P are considered first and are determined at the close of the current year. Any distribution that exceeds the total of current and accum E&P is a return of capital and reduces shareholder's basis. Anything in excess of that is taxed as cap gain. https://answerconnect.cch.com/topic/46dee5267c6b1000a17990b11c18cbab013/earnings-and-profits-limitation-for-dividends