Say you are selling a business that includes among its assets zero-basis receivables and/or self-created goodwill.
Zero-basis receivables are uncollected receivable balances that have not yet been included in taxable income because your business uses cash-method accounting for tax purposes.
Self-created goodwill is the value of your business in excess of identifiable financial, tangible, and intangible assets (such as receivables, inventory, equipment, furniture, real estate, software, customer lists, and so forth). Self-created goodwill is basically the extra value of a business’s good reputation due to the efforts of its owner(s) and/or employees.
As a member at this site, you likely are one of those small businesses or professional practices operating on a cash basis, meaning that you have zero-basis receivables. Also, you are likely a one-owner business or professional practice, and that means a high probability of self-created goodwill.
In this article you will learn how the tax code treats you as the seller when you sell your business or professional practice and it includes zero-basis receivables and/or self-created goodwill. ... Log in to view full article.