Tax Law (Questions About Taxes)/S-Corp Asset Sale

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Question
Hello John,

Client is selling his business as an asset sale, goodwill, nothing else as an installment sale.  He is structured as an S-Corp and owns 100% of the stock.

My assumptions are the following:

1. He maintains 100% of the stock of the company until the installment sale has been completed.

2. He then must continue to file corporation tax returns until the installment sale has been completed.

Please let me know if my assumptions are correct.

Thank you in advance.

Jeff

Answer
Jeff,

Thanks for your question.

You state that it is an asset sale. If this is truly the case, he will continue to own 100% of the stock of the company indefinitely.  He's not selling the stock, he is selling the assets.  

He will continue to file corporate tax returns as long as the instalment sale is in effect.  Once the last instalment is completed, he could then take action to dissolve or de-activate the company.  He may wish to file a final return with the IRS, but continue the corporate charter at the state level in order to keep others from using the name of the corporation.

Alternatively, to avoid filing corporate returns for a number of years, the note could be assigned to him personally.  This would be a part of the liquidation/dissolution plan for the corporation and treated as a distribution to him.

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

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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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