Dick Adams <rdadams[at]smart.net> wrote:

- quote -

The last time I checked, installment sales for cash-basis
taxpayers had receipts from sales taxed in the year
received. He could have them pay over three years and have
his capital gain (plus a bit of interest) stretched over
that time.

If he does that make sure the sale contract includes a
security interest in everything sold - sort of like a
mortgage. He then files a form generally called a UCC-1
with the secretary of state, to perfect the security
interest. If the buyer for some reason doesn't pay, he can
take the business (or what's left of it) back.

Stu

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An internet business is for sale. It has a zero cost basis.
Although the asking price does not seem unreasonable, IMRHO
I can see someone paying cash up front for it since the owner
is going to Canada for 2-3 years.

He asked me if instead of selling the business what would be
the tax consequences of leasing it with an option to buy in
2-3 years. My reaction was that would ne converting capital
gains into ordinary income! I suggested he sell the URL and
the software on a contract basis. He was afraid the IRS
would treat it as though he sold it and had to capture the
income in the year of sale. My reaction was "Go see someone
who knows more about this situation than I do".

Other than agreeing with may advice on seeing someone else,
how would you handle this?

Some people think I know taxation. Most people seem to
think accounting is fungible!

Dick

<< ------------------------------------------------------- > << The above is intended for educational purposes only. > << It does NOT constitute legal OR professional advice. > << It cannot be used by any taxpayer, for the purpose of > << the purpose of avoiding penalties that may be imposed > << upon the taxpayer. > << > << The Charter and the Guidelines for submitting posts > << to this newsgroup as well as our anti-spamming policy > << are at www.asktax.org. > << Copyright (2006) - All rights reserved. > << ------------------------------------------------------- >