As an experienced business broker, I am here to provide you with an answer to the question “Where to report sale of goodwill?”. When a business’s goodwill is sold, the buyer’s consideration is the cost of the assets acquired and the seller’s consideration is the amount realized (money plus the fair market value of any other assets received). The proceeds of the sale of personal goodwill are taxed at capital gain rates. This means that all amounts received by the shareholders from the sale of their personal goodwill should be taxed at capital gain rates, irrespective of whether the goodwill is considered a personal asset or not.

Where to Report Sale of Goodwill?

When the sale of goodwill is made, it is taxed to the seller at capital gains tax rates. The current capital gains tax rates have changed several times over the last 20 years. Therefore, it is important to check what the current rates are and calculate the taxes owed. To report the sale of goodwill, you must list the assets, plus the value and sale price of each, on Form 8594: Asset Acquisition Statement under Section 1060. This form should be attached to the 1040 and the seller can then report the sale of the goodwill and calculate the taxes owed.

Goodwill is a valuable asset for any business and understanding how it is reported and taxed is important. Here at Atlantabusinesses.com, we provide you with the resources and expertise to understand the legal and financial aspects of selling a business. We are dedicated to giving you the answers you need to make the best decisions. Visit us today to learn more about selling a business and how to navigate the process.

What is the method of reporting the sale of goodwill?

In recent Tax Court decisions, goodwill has been declared a personal asset instead of a business asset, which allows the sale of goodwill assets to be classified as a capital gain and taxed at a lower rate with only one taxation.

Where is goodwill reported – Form 4797 or Schedule D?

The assets will be reported on Form 4797 and shown on Form 1120S line 4, while the goodwill and intangibles will be reported on Schedule D as a capital gain.

Do you declare the sale of goodwill on Form 1040, Schedule D?

The sale of goodwill should be recorded on Schedule D as a capital asset.

What is the income tax treatment of the sale of goodwill?

It is important to discuss the current capital gains tax rates with a CPA before selling your company, as taxes are just one of the many considerations. Goodwill is subject to taxation at capital gains tax rates, which have fluctuated over the last two decades.