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Tax Help
I know there are some Accountants on this board so figured I would ask here. DH owned a business for the last 7 years or so. As of Dec 31, 2010 the business has ended. We already filed our 2010 taxes (didn't show a loss because he still made money but decided to end it for various reasons.)
He had a friend interested in buying out his business. Won't take the name but took customers and equipment. Last weekend he paid us for everything ($20k). He gave us a cashier's check but made out in DH's name, not the business. My questions is do we have to claim this as income next year? I know technically any income you should really claim on your taxes, but we obviously don't want to pay the tax on this. Since it is not in his business name though we wouldn't claim it on the Sch C anyway right?
And if we DO have to claim it how do I figure out how much to put aside for taxes so we don't owe come April 15.
Re: Tax Help
I'm a CPA, but without knowing the ins-and-outs of your situation I can't give detailed advice. However, the short answer is yes, you do have to report this on your income taxes. To put it simply, you would subtract the amount of the equipment and other assets the friend received in return for the $20k he gave you. This would be the taxable amount (assuming you made monday on the deal, instead of incurring a loss) not the the whole $20k.
As the PP said though, I'd definitely seek the advice of a CPA and have a professional do your taxes to be sure you don't get a nasty letter from the IRS in a year or two. Good luck!