Tax Prep by Deb Posted November 13, 2008 Report Share Posted November 13, 2008 I am working on a return for one of my clients. He purchased an existing business, a sandwich shop for $41,043.50. There was no building involved, it was just the established business in a rented building. He did state that some of this included the equipment but most of it was just for the established location. How do I show this cost? The business is a schedule C business. Most of my business returns I prepare are for people already established or who start their own business from scratch. So I'm not exactly sure were this figure goes on the schedule C or if it even goes. Any imput would be greatly appreciated! Deb! Quote Link to comment Share on other sites More sharing options...
BulldogTom Posted November 13, 2008 Report Share Posted November 13, 2008 The first thing you need to see is the sales agreement. If there is no breakout of the sale of the equipment and the goodwill, then you will have to list all the equipment at FMV, and subtract from the sales price to get the amount of goodwill. Goodwill is a §197 or 195 (I forget which one) intangible asset amortized over 15 years. Obviously, your client wants as much asset cost as possible to depreciate and as little goodwill as possible. Get good estimates of the FMV of the used equipment. An outside estimate is better than the numbers the client will pull off the ceiling. Tom Lodi, CA Quote Link to comment Share on other sites More sharing options...
kcjenkins Posted November 14, 2008 Report Share Posted November 14, 2008 Was a Form 8594 done for the purchase? There should have been one, although it's not nearly uncommon enough for there not to be one. Still, you should do one, and include it in the return. Whether it matches what the seller reported is not your problem. You will put the depreciable items in the Asset entry, of course. Amortize items also. Inventory purchased would go into page two under Purchases, etc. Quote Link to comment Share on other sites More sharing options...
OldJack Posted November 14, 2008 Report Share Posted November 14, 2008 a sandwich shop for $41,043.50.Deb! Its not likely that the sale price got down to the 50 cents without some list of what was being sold. You have to have them give you the list. Quote Link to comment Share on other sites More sharing options...
Tax Prep by Deb Posted November 14, 2008 Author Report Share Posted November 14, 2008 Thanks, I will contact him and have him fax over the info in the morning. So the goodwill then is entered on the asset worksheet, then I would choose amoritization, then start up cost? Deb! Quote Link to comment Share on other sites More sharing options...
OldJack Posted November 14, 2008 Report Share Posted November 14, 2008 Thanks, then I would choose amoritization, then start up cost? Deb! Correct Quote Link to comment Share on other sites More sharing options...
kcjenkins Posted November 14, 2008 Report Share Posted November 14, 2008 Do the 8594 and it will help you determine how much goes where, Deb. Quote Link to comment Share on other sites More sharing options...
Recommended Posts
Join the conversation
You can post now and register later. If you have an account, sign in now to post with your account.