"Cherrybounce" <chdavi15[at]hotmail.com> wrote:
- quote -

Repossessions and Foreclosures are a specialty niche in the
tax and accounting business. Not every tax pro deals with
these. It is important that you find someone local who is
well versed in these to guide you. A firm I used to work
for many, MANY years ago did quite a bit of this work, so
the following is from memory and should be doubled checked
before being relied on.

If you reported the sale on the installment basis when you
filed your return then you have reported the gain from sale
as you have collected it. If you collect nothing further
you will have no further gain to pay tax on. HOWEVER, if you
retake possession of the store you will have to recalculate
your gain since you now have the store back AND all the
money you've already received. It is likely that this will
result in a substantial amount of immediate taxable, yet
phantom, income, but it will depend heavily on exactly what
you sold. For example, you say you sold a store - did it
include the land and the building as well as the assets of
the store? What about franchise rights for a store name?
All of these need to be factored in when considering the
value of what you may repossess - and virtually ALL of this
value will become taxable to you immediately if you
repossess.

If you reported the sale all in one year, besides getting
bad advice about that, you may have several options. You
may be able to go back and amend the original return, if the
statute is still open, and adjust the sale price to reflect
the actuality of the events, though I doubt this will be
available, it could be possible. Or you might have a
capital loss on your current year return for the
uncollectible portion of the note. This will not be
pleasant because it won't be deductible all at once, instead
you can use this loss to offset other capital gains and
deduct an additional $3K per year till you use it up.
Depending on the amounts involved it could take years - I
currently have a client who has a capital loss carryover so
large it is doubtful he will live long enough to use it all
up!

As far as your stock in the store that you sold, you may
have a capital loss if the value of that stock is totally
worthless. This begs additional questions about how you
sold the store - an asset sale or a stock sale. You'd also
have to know your basis in the stock in order to calculate
any capital loss from it becoming worthless AND if you
decide to repossess the store doing so may make your stock
NOT totally worthless, which would negate any capital loss
since it would have to be totally worthless before you could
write it off without actually selling it.

Please note that I have barely scratched the surface of this
issue. The particulars of your situation will determine
what your options are, both tax wise and business wise. I
strongly urge you to get to a qualified tax pro who is
experienced with repossessions and foreclosures in your area
to go over the details of your situation.

Good luck,
Gene E. Utterback, EA

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"Cherrybounce" <chdavi15[at]hotmail.com> wrote:
- quote -

Recalculate the installment and find out.

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

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David Woods, EA, ChFC, CLU wrote:
- quote -

He paid for 3 years and then stopped. He cannot pay the
balance. Can I somehow get something out of my worthless
stock?


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"Cherrybounce" <chdavi15[at]hotmail.com> wrote:

- quote -

You have to recalculate the installment sale. What the
result is, I don't know. Did the installment sale actually
being or did he just never pay?

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

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My C corp was selling a small grocery business on an
installment sale basis. The buyer threw in the towel last
year, still owing about $70K on the contract. There were
almost no salable groceries or assets left when he left and
I don't expect to get anything at all out of him. There is
$11000.00 of stock issued to me on the corp. books. I am the
only shareholder. What can I salvage out of this? Thanks.

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