I sold my business assets. What type of income does this get reported as when filing?

I sold assets to a business that I no longer run. In the asset purchase agreement, I sold rights to a brand name, customer list, and software, and am am due quarterly royalties. What kind of income is this considered?


Payments were received in 2013. This was an LLC, closed at the beginning of 2014.

3 Answers

  • 7 years ago
    Favorite Answer

    "I sold assets to a business "

    In other words, you dissolved the business. How was it formed, when did it cease?

    Even a Schedule C must be properly recorded.

    When you close and sell a business, you need to determine the net worth of the company first. If it is a negative, any gain on assets will be mitigated.

    If the assets are depreciated or amortized, you must reduce their basis by that amount. Some assets, like a customer list built up over time, would not have been amortized because you did not buy it.

    You need to consult a good accounting and tax professional. I would recommend a CPA who practices business tax preparation. Many on here would recommend an EA (Enrolled Agent) but knowing the tax code does not mean he/she knows anything about proper accounting practices. I've known EA's with a Masters Degree in Taxation to royally screw up a business return.

  • 7 years ago

    It would probably be a long term capital gain. Did you actually collect money from the sale in 2013? If not, then it's not an issue. Next year, you would put the royalties under other income. If you did collect some payment for the assets, then you have to look at previous tax returns to see how they are valued. You can deduct any book value from the amount you sold them for.

  • tro
    Lv 7
    7 years ago

    the sale of assets is reported on form 4797 and Sch D

    if you are to be paid royalties, this would income reported on Sch E

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