Selling Your Business

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10 Oddball Tax Deductions

11 Most Overlooked Tax Deductions

Updated for 2012

Tax Aspects of Selling a Sole Proprietorship

Selling a Group of Assets:

The sale of a sole proprietorship is not the sale of a single asset; it is the sale of a group of assets that make up the business.

For tax purposes, each asset in the group is treated as being sold separately and gain and loss for each asset is computed separately.

Section 1231:

Real or depreciable property held over one year before being sold are subject to special tax treatment under Section 1231 (to be covered later).

When Does a Group of Assets Constitute a Trade or Business?

A group of assets constitutes a trade or business if either of the following applies:

Goodwill:

Goodwill is associated with a company's good reputation in terms of the products it sells, the services it performs, and it's standing in the community.

Goodwill is tied to the ability of a business to continue doing business with its existing customers and to attract future customers.

Goodwill is an intangible asset that may only be acquired as part of the acquisition of a business. It is a Section 197 intangible whose value is amortized over 15 years by the purchaser of a business.

Goodwill generally represents the excess of the price paid for a business over its net asset value (also called book value).

Going-concern value:

Going-concern value is the value attributed to a business entity as an on-going enterprise.

Going-concern value focuses mainly on the ability of the company's assets to generate a return on investment not simply goodwill.