Charlotte sold her unincorporated business for $600,000 in 2014. The sales contract allocated $120,000 to equipment, $300,000 to land, and $180,000 to goodwill. Charlotte had a $0 basis in the goodwill, the land cost $150,000, and the equipment originally cost $250,000 but it was fully depreciated. What is the amount of the gain eligible for installment sales treatment?

Question

Quizplus · Accepted Answer

The amount eligible for installment sales treatment is the portion allocated to the goodwill, which is $180,000. Charlotte had a zero basis in the goodwill, so the entire $180,000 will be gain. The equipment had a zero basis and was fully depreciated, so the entire $120,000 allocated to it will also be gain. Therefore, the total gain eligible for installment sales treatment is $300,000.

Charlotte Sold Her Unincorporated Business for $600,000 in 2014