Can any one help me with guidance on an LLC tax payer purchasing customer list with annual install cash settlement for three years? Thanks!

9 replies
37 views

Taxpayer is using cash accounting and LLC is a single member disregarded entity.

ProConnect Tax Online

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TaxesTechAnswer

Level 5

Love your answer! Thank you so much George4Tacks!

George4Tacks

Level 15

This Link may be helpful

Amortize the client list for 15 years, using the full purchase cost. Make the payments over the next 3 years, not deductible. Deduct any interest charge as interest.

Answers are easy. Questions are hard!

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TaxesTechAuthorAnswer

Level 5

Love your answer! Thank you so much George4Tacks!

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goshen9882

Level 5

While the facts are limited, the buyer and seller may be required to complete form 8594. It is not unusual that a customer list can make up the majority of a trade or business; and most likely the only asset that has value.

https://www.irs.gov/forms-pubs/about-form-8594

BobKamman

Level 15

I think a high percentage of buyers and sellers first hear about Form 8594 a year or so after the deal is completed. I wondered what the penalty would be, if it's not filed with a return. Apparently it's $250 under Section 6721.

You can always pay your accountants and lawyers $500 to make sure the form is completed and filed correctly.

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goshen9882

Level 5

While there may be sarcasm in the response, we don't make the rules. Our role is to prepare the return in accordance with the code and regulations.

In addition, not following a simple requirement like this can lead to additional scrutiny.

The OP asked for help and it was provided.

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