Abby sold her unincorporated business which consisted of equipment and goodwill. The equipment had an original cost of $200,000 and Abby had claimed $120,000 in depreciation (adjusted basis = $80,000). Abby had no basis in the goodwill. The sales price for the business was $250,000, with $150,000 for the equipment and $100,000 for the goodwill. The buyer agreed to pay $120,000 on June 30, 2018, and $130,000 (plus interest at the Federal rate) in two years. Abby's gain to be reported in 2018 (exclusive of interest) is:

Question

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Abby's adjusted basis in the equipment is $80,000, and she received $150,000 for it, resulting in a gain of $70,000.
The sales price for the adjusted basis of goodwill is $100,000, resulting in a gain of $100,000.
Therefore, Abby's total gain is $170,000.
Since Abby received $120,000 in 2018, her gain to be reported in 2018 is $118,000 ($170,000 - $120,000).

Abby Sold Her Unincorporated Business Which Consisted of Equipment and Goodwill