Taxes: Help with an Installment Sale

[bizlady]

I sold a small business this year where the buyer will pay me over the next 5 years. I've had the business since 2008, so I know that it is a capital gain.

The contract was set up so that X amount went to the domain and website, $525 was for equipment, and the balance was goodwill.

The buyer made a $4000 down payment, of which $525 was for the miscellaneous equipment (used telephone used copier etc.) Monthly payments started January 1 of this year, so no interest to report this year.

I know that I need to use form 4797 and 6252 to report the sale.

It seems I need to report the $4000 down payment, but of that, $3475 goes towards the principal, and the $525 I believe is taxable to me and I am uncertain where to or how to report that $525.

I'm using TurboTax, and it would probably cost me more than $500 to get an accountant involved for what I thought was going to be something relatively simple.

Can anyone help me with this?

[z-d-g]

I can tell you this...I had an installment asset sale of my business that led me to FIRE and even though I am a CPA, I hired an asset sale tax specialist CPA and it was worth every dime. It would have taken me years to research all the nonsense involved. I know that's not what you wanted to hear, but it's the truth (or was for me). Many good lucks.

[bizlady]

I hear you! Kind of scary to hear this for me from a CPA :-)

But the business was a relatively small one, with only $525 in hard assets, and the rest really the website and goodwill. Sale price certainly not enough to retire on.

I know we classified the assets correctly, and specified those in the contract. But that $525 is just plain tripping me up.

Worst-case scenario, I'll probably just report as other income-as we hardly fall into the "good choice for an audit" group. Still, I would prefer to file cleanly, but just can't justify the expense of an accountant for a relatively small sale.

So still hoping someone out there can guide me :-)

[z-d-g]

Yeah, a few clarifications:

1) I never practiced tax a day of my life, so the last time I had to deal with tax code was when I passed the CPA exam.

2) You make a good point about the size of the sale and can probably do this yourself with software and research.

3) Yeah, doesn't sound like you'll be audited in any case.

[pb4uski]

See the example on page 10.

http://www.irs.gov/pub/irs-pdf/p537.pdf