Tax Law (Questions About Taxes)/Sale Of Assets Of S Corp
I sold the assets of my S Corp in 2013. The company is still alive, as I still retain some small debt and the equity shares.
The buyer made a check to me personally for $570,000. My inventory was valued at $170,000, equipment $10,000 and Goodwill for $390,000.
How do I record this sale on 1) My form 1120S and 2) my form 1040.
I want to be prepared to question any tax preparers in the furture as I have received varying opinions causing me to be on extension this year until I, personally, understand more.
Let's try to eliminate confusion. While the status of a S-Corp as "separate" from the owner, is debatable, let's just say it is separate from you the stockholder.
Did the S-Corp sell its assets? or; Did you sell your stock? Those weren't your assets. Those were the corporations assets. The only asset you had was your ownership interest, represented by the stock certificate from the corporation, issued to you.
If no written record exists to substantiate this point then you are left to the whims of others and possibly a court to make a final determination.
If the corporation sold its assets, it would have received a check and would have made out a bill of sale, and title transfers would have happened, and the 1120s tax return would reflect the details of the transaction, and the S-Corp would have experienced a gain or loss (that gain or loss would be attributed to you as the stockholder, but it at least. . .) would be accounted for on the corporate records.
But the check was to you personally. That does queer this transaction. No longer is a clear, concise and reasonable event repesented. It has become ponderous, and muddied, and questionable.
Ultimately, either way, you would have gotten the money; since the S-Corp is a pass through.
So. . .
It is up to you to create a pile of documentation. Affidavits, explanations, records, tax returns, bills of sale, etc. that support your "claim" that the sale was by the S-Corp in spite of the check being written to you. You might also write a check to the S-Corp, personally, since the payment was "erroneously" given to you and you wanted to insure that the funds were collected, instead of waiting for a new check to issued. So you effectively handled the escrow of the sale. If you don't understand "Escrow" let me know. But that would be my best recommendation of a common, reasonable explanation of a transaction such as you outlined above.