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Subject Author Date
interest on installment purchase of s-corp Elizabeth Brennan 06-05-2008
Posted by Harlan Lunsford on June 9, 2008, 4:15 pm
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 eagent wrote:

(snipped....)
>
> I'd bet this was supposed to be an asset sale and NOT a stock sale
> since that is the norm. As an asset sale, either her or her new
> company purchased the assets of the old business from the old
> company. An asset sale allows the new company to restart
> depreciation.

Gene, I got the impression it was a sale of stock between old and new owner.
>
(snipped....)
>
> The best recommendation I can make is for your client to pony up the
> sales agreement. Then either you read it, if you understand such
> things, or you have it read by a professional tax preparer who is
> experienced with such things. Then you can get the real scoop on how
> it should be.

Yes, we would all be interested as to what actually happened. Please
let us know, Elizabeth.

>
> I do have a question - why is there a differnent account for the
> business return? How come you aren't doing both?

This is a great question, Gene. If new owner owns 100% of the stock
(seems so, since she is "purchasing an s-corp via a 10-year structured
installment agreement."), then she should be the one to hire and fire,
and/or choose the corporate accountant.

What are we missing now? (grin)

ChEAr$,
Harlan Lunsford, EA n LA

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Posted by Elizabeth Brennan on June 9, 2008, 6:23 pm
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>
>I just love these types of questions <g>!

yeah...some of them get to be real doozies! <g>


>I do have a question - why is there a differnent account for the
>business return? How come you aren't doing both?

several reasons...

1. I don't wanna <g>. I'm getting up there in age and I realize I'm
not as sharp as I once was. I do all the bookkeeping on this business
and I really don't want to do the tax returns.

2. The owner wants continuity. This CPA firm has been doing the tax
returns for a very long time (quite possibly for the entire life of
the company) and are the ones that structured the buyout.

3. I've been an EA (my license is currently in inactive status while I
decide if I even want to keep it -- like I said, I'm not as sharp as I
used to be and I'm leaning toward retirement) and a QuickBooks
ProAdvisor, and I work very well with other professionals. The CPA
knows that I'm not trying to push him out, the client does not feel at
all pressured to choose between me and the CPA, and I don't put my
name on the Corp returns -- a win-win-win situation! <g>

3. The owner doesn't want to pay the CPA's rates to do her own
personal return. She has 2 K-1s for two different S-corps (she's the
sole owner of the one in question and a partial owner of the other),
one W-2 and two children. She figures it's not a tough return and was
going to do it herself on Turbo Tax, till it came to trying to figure
out what to do with that $16,000 of interest she had paid the former
owner for the stock buyout. I was helping her look into it as a
courtesy (she pays me a LOT of money to be her bookkeeping department
<smile>!)

E

--
<< ------------------------------------------------------- >>
<< The foregoing was not intended or written to be used, >>
<< nor can it used, for the purpose of avoiding penalties >>
<< that may be imposed upon the taxpayer. >>
<< >>
<< The Charter and the Guidelines for submitting posts >>
<< to this newsgroup as well as our anti-spamming policy >>
<< are at www.asktax.org. >>
<< Copyright (2007) - All rights reserved. >>
<< ------------------------------------------------------- >>

Posted by Haskel LaPort on June 10, 2008, 11:42 am
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> 3. The owner doesn't want to pay the CPA's rates to do her own
> personal return. She has 2 K-1s for two different S-corps (she's the
> sole owner of the one in question and a partial owner of the other),
> one W-2 and two children. She figures it's not a tough return and was
> going to do it herself on Turbo Tax, till it came to trying to figure
> out what to do with that $16,000 of interest she had paid the former
> owner for the stock buyout. I was helping her look into it as a
> courtesy (she pays me a LOT of money to be her bookkeeping department
> <smile>!)

Your arrangement with the client is not that unusual. I to have similar
arrangements with a few of my clients. I do however prefer the label myself
"consultant" or "part time controller" rather than bookkeeping department.

Since you are privy to the S-Corporation's original books of entry, can I
assume the buy-out installment payments are made by the corporation and
posted to the Sharholder's Distributions account?











>
> E

--
<< ------------------------------------------------------- >>
<< The foregoing was not intended or written to be used, >>
<< nor can it used, for the purpose of avoiding penalties >>
<< that may be imposed upon the taxpayer. >>
<< >>
<< The Charter and the Guidelines for submitting posts >>
<< to this newsgroup as well as our anti-spamming policy >>
<< are at www.asktax.org. >>
<< Copyright (2007) - All rights reserved. >>
<< ------------------------------------------------------- >>

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