Tax Law (Questions About Taxes)/Taxable..???

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Question
My self-employed father passed away & he had a business
partner. Small business nothing fancy. The business
partner wants to "buy" me out/settlement. We're
talking around 25k..the question is...is this
taxable ???

Thank YOu

Answer
Alex,

Thanks for your question.

Yes, it is taxable, but you may not have a gain.  When you inherited his portion of the business, your basis in the business is the fair market value of his portion of the business as of the date of death.  If you sell it for more than that, you have a long term capital gain.  If you sell it for less, you would have a deductible capital loss.

You will probably need to engage the services of a business valuation specialist to determine the value.  Alternatively, you do it yourself utilizing some valuation models.  This link has some of the most common models that are utilized.  http://www.collin.edu/sbdc/docs/Business-Valuation-Methods.pdf

Hope this helps.

John Stancil, CPA

Tax Law (Questions About Taxes)

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John Stancil, CPA

Expertise

I can answer questions on personal income taxes, partnerships, and some corporate income taxes. I can deal with some state tax questions. Limited gift and estate tax questions. I am also familiar with ministerial and church tax reporting issues. I am Professor Emeritus at Florida Southern College. Sales taxes and property taxes are state and local issues so I am not likely be be able to give you an in depth answer on those types of taxes. I have maintained a CPA practice, specializing in tax, for over 35 years. I am a member of the National Association of Tax Professionals, The Florida Insititute of CPA's, The NCPE Fellowship. In addition I am a Certified Mentor for SCORE. Visit my website at www.mybaldcpa.com. I also offer seminars and consultations to churches and clergy on their tax issues at www.churchtaxsolutions.com Also visit my blog, www.thetaxdocspot.com. I am listed on Tax Connections at https://www.taxconnections.com/profile/John-Stancil/12258973 Prepare and file your own taxes at www.1040stancilcpa.com

Experience

I hold a doctorate in Accounting, and am a CPA. My certifications of CIA, CFM, and CMA are inactive. I passed all certification examinations on the first attempt, and received honorable mention for my scores on the CIA exam. I have operated a CPA firm for over 37 years and have taught accounting and tax at the college level for over 35 years.

Organizations
FICPA, NATP, NCPE Fellowship, Lakeland Business Leaders

Publications
The CPA Journal, Florida CPA Today, Green Consumer, Green Business, Global Sustainability as a Business Imperative, Palmetto Review, NATP TaxPro Quarterly, Mustang Journal of Finance and Accounting.

Education/Credentials
DBA University of Memphis MBA University of Georgia BS in Accounting Mars Hill University

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