CPA's Assets Disposal, new business Question:?

Question

If I paid $120,000 for a business in 2006

Goodwill $100,000
Assets $ 20,000

And I threw out $10,000 of Assets throughout 2006

How would I put this on the tax return or financial statements.

Would I still say the business cost 120,000 and put only 10,000 to assets? or Would I show the assets as being disposed of, on a certain date?

Please give advice, basically like this
Good will
Assets
Write Off
equals 120,000

Answer 1

Actually, there is a form that both you and the seller need to file with your 2006 return that states what value you sold/purchased the assets at. Redetermining the assets is probably not a good idea unless you've hired someone that has given you a good basis for doing that.

Goodwill will remain on your (internal or book) financial statements indefinitely. For tax purposes, you may amortize goodwill over a 15 year period.

For your 'junked' assets, you will have no depreciation in the current year on those assets and write off the loss as 'loss on junked assets'. This does not need to go on Schedule D or Form 4797 since you did not sell anything.

Your remaining 10,000 of assets would be depreciated using the appropriate MACRS class life it belongs to (7 for furniture, 5 for computers, etc.)

Hope that helps.

Answer 2

Advice or help of a professional auditor is recommended!