Tom Healy wrote:

- quote -

Damn! You're right! Thanks for the correction.

Stu

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There is an argument that can be made that the income should
be deferred based on the Artnell case. 400 F.2d 981 (7th
Circuit 1981). However, it is far from certain that this
argument would be successful if challenged by the IRS.

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Bonnie wrote:

- quote -

the fact the corporation was/is on the accrual method of
accounting doesn't make any difference. IF the whole
purchase price is received within the same year, then it's
all taxable, one way or another. Just can't take,
say,9000$ for an intangible asset (goodwill I'm really
thinking of , but a covenant in your case) and spread out
the income to future years.

ChEAr$,
Harlan Lunsford, EA n LA
11 Oct 04 15:19:05

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- quote -

Actually, a covenant not to compete is a Sec 197 intangible;
writeoff period is 15 years.

--
Thomas E Healy, CPA, PC
1650 38th St., Ste 202W
Boulder, CO 80301
Please send email to: tom[at]tomhealycpa.com, since I block all email at my
newsgroup address.
phone (303) 443-1804
fax (720) 489-3772

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"Bonnie" <beddingfield[at]cableone.net> wrote:
- quote -

Even on an accrual basis I don't what changes if you already
received the money.

--
David M. Woods, EA, ChFC, CLU
Woods Financial Services
Norwood, MA 02062
www.woods-financial.com

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beddingfield[at]cableone.net wrote:

- quote -

Is the first accountant either an EA oR CPA? (just wondering)

Of course it don't matter what the second one is, or isn't,
cause he's right.

ChEAr$,
Harlan Lunsford, EA n LA

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beddingfield[at]cableone.net wrote:

I should have been more specific. This business was on an
accrual basis. The covenant was specified in the sales
contract and it was a sale of assets of the company, not a
stock sale.

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"beddingfield[at]cableone.net" <beddingfield[at]cableone.net> wrote:

- quote -

#2. No idea what #1 is talking about except perhaps
amortizing it as an expense, in which case he is still wrong
and further it is income to YOU.

--
David M. Woods, EA, ChFC, CLU
Woods Financial Services
Norwood, MA 02062
www.woods-financial.com

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beddingfield[at]cableone.net wrote:

- quote -

Are you a cash basis taxpayer? If so, income is reported in
the year received.

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- quote -

Once you got the cash, its income when received. A good
reason to consult a CPA or EA before you sign the deal.

--
Thomas E Healy, CPA, PC
1650 38th St., Ste 202W
Boulder, CO 80301
Please send email to: tom[at]tomhealycpa.com, since I block all email at my
newsgroup address.
phone (303) 443-1804
fax (720) 489-3772

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beddingfield[at]cableone.net wrote:

- quote -

In general you recognize taxable income in the year it is
received. If you get all the money for a 10 year covenant
not to compete all at once, it is taxable when you receive
it.

The first accountant may be confusing the situation with the
buyer's side. He paid it to you all up front, but can write
off that cost over 10 years.

Stu

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<beddingfield[at]cableone.net> wrote

- quote -

Generally, if you received it, it's taxable.

If you haven't received it yet, then it's not income until
you do.

--
Paul A. Thomas, CPA
Athens, Georgia
taxman at negia.net

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Two accountants are giving me opposing opinions. We sold our
business for cash. The first accountant says monies received
for Covenant Not To Compete can be set up as deferred income
since there is a 10 year life to complete it. The second
accountant says no, because the money was arealy received in
the sale. Obviously, I would like to beleive the first
accountant is correct. Please tell me which one is correct.
Thanks!

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