"Vijay Sharma" <SharmaV[at]Sutterhealth.org> wrote

- quote -

It's not sold in the normal course of business and would not
be subject to SE tax.

--
Paul Thomas, CPA
paulthomascpapc[at]bellsouth.net

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Vijay Sharma <SharmaV[at]Sutterhealth.org> wrote:

- quote -

I would sell the inventory at cost (or book value), and the
rest of the business (including goodwill) for the remainder
of the price, so that it doesn't matter.

You might get away with selling the inventory slightly below
book value.

Seth

<< ================================================== ===== > << The foregoing is intended for educational purposes only > << and does NOT constitute legal OR professional advice. > << > << The Charter and the Guidelines for submitting > << messages to this newsgroup are at www.asktax.org. > << Copyright (2006) - All rights reserved. > << ================================================== ===== >

ijay Sharma wrote:

- quote -

The issue would be whether this is self-employment income,
which is governed by Section 1402. Section 1402(a)(3)(C)
provides for the following exclusion from the general
definition that would include income from the trade or
business:

--begin quoted text

(3) there shall be excluded any gain or loss--...

(C) from the sale, exchange, involuntary conversion, or
other disposition of property if such property is neither--

(i) stock in trade or other property of a kind
which would properly be includible in inventory if on hand
at the close of the taxable year, nor

(ii) property held primarily for sale to customers
in the ordinary course of the trade or business;

--end quoted text

While I've not looked for additional authority, initially it
appears that you'd have trouble clearing Section
1402(a)(3)(C)(i)'s inclusion even if we take the position it
wasn't offered primarily for sale under 1402(a)(3)(C)(ii).
You have to fail both tests to get it out of inclusion as
self-employment tax. *

--
Ed Zollars, CPA
Podcast located at http://ezollars.libsyn.com

<< ================================================== ===== > << The foregoing is intended for educational purposes only > << and does NOT constitute legal OR professional advice. > << > << The Charter and the Guidelines for submitting > << messages to this newsgroup are at www.asktax.org. > << Copyright (2006) - All rights reserved. > << ================================================== ===== >

I have been getting conflicting opinions from CPAs in
regards to the treatment of Inventory when a business
(partnership) is sold -

One opinion is to treat the sale of inventory as if sold
during the normal course of business, therefore report it on
Gross Proceeds and Cost of Goods sold on Form 1065. But
this would subject it to Self-Employment Tax.

The other opinion is to report it on Form 4797 under Part II
Ordinary Gain/Loss because it was not sold in the normal
course of business and therefore should not be subject to
Self-Employment Tax.

Please comment which one of the viewpoint is correct.

Thanks in advance for your input.

<< ================================================== ===== > << The foregoing is intended for educational purposes only > << and does NOT constitute legal OR professional advice. > << > << The Charter and the Guidelines for submitting > << messages to this newsgroup are at www.asktax.org. > << Copyright (2006) - All rights reserved. > << ================================================== ===== >