What are the tax consequences in the following scenario

Assignment Help Taxation

Reference no: EM133320574

Question: What are the tax consequences in the following scenario for the sellers (Tom and Donna) for selling their heating oil delivery business to the competitor Energy Star Corp who is their buyer on April 30, 2022?

The heating oil delivery business's assets consisted solely of a customer list, service parts, oil inventory and three delivery trucks and no real property:

• Truck #1, purchased on June 15, 2020 for $80,000, cumulative depreciation $35,000, FMV of $70,000

• Truck #2, purchased on March 20, 2018 for $45,000, cumulative depreciation $40,000, FMV of $60,000

• Truck #3, purchased on October 15, 2018 for $40,000, cumulative depreciation $35,000, FMV of $50,000

The business was owned by both of them with a share of 50% each. They realized net profits of $45,000 (JAN-APR , 2022) from their operations. The shareholder account balances for Tom and Donna as of Jan 1, 2022 were $0.

Their competitor, Energy Star Corp. (Buyer), paid the purchase price of $495,700 plus the value of the oil inventory at cost on the day of the closing, allocated as follows:

• Truck 1 70,000

• Truck 2 60,000

• Truck 3 50,000

• Supplies Parts (cost - $4,300) 8,200

• Restrictive Covenant* 7,500

• Goodwill 300,000

• Oil Inventory purchased at cost, generated no gain or loss

*Restrictive Covenant: As a condition of the purchase, the Buyer demanded that Tom M, Donna M and Tom M Oil Inc. agree not to own or operate, directly or indirectly, another oil company for three years, in exchange for $7,500.

Tom M Oil Inc. ceased business as of April 30, 2022 after the sale and has distributed the proceeds to Tom and Donna in complete liquidation during 2022.

Reference no: EM133320574

Questions Cloud

Human relationships and story-telling : Analyze one of the stories from the Unit 5 assigned reading "The Chrysanthemums" by John Steinbeck for what dies

Benefits of pmhnp prac 6645 clinical skills self-assessment : bWhat are the benefits of PMHNP PRAC 6645 Clinical Skills Self-Assessment before starting a practicum?

Advise jam transport pty ltd of the legal issues in this : John and Aaron call a member's meeting of JAM Transport Pty Ltd at which it was resolved to remove Matthew as a director. Matthew is not happy with the changes

What is the authors main point or thesis about the film : ENGLI 1135 College of DuPage What are the smaller points they make in order to make the larger point? What evidence do they provide from the film

What are the tax consequences in the following scenario : What are the tax consequences in the following scenario for the sellers (Tom and Donna) for selling their heating oil delivery business to the competitor Energy

Explain the type of health promotion-related need : Identify and explain the type of health promotion-related need. Identify a health promotion strategy to address the health promotion-related need.

Discuss idea with reference to julian of norwich : ENEL 315 Wilfrid Laurier University Contrary to popular beleif, medeival people could have very individual religious identities that were not just dictated

How much of the benefits received must she include income : how much of the benefits received must she include in her income, assuming she had never previously received unemployment compensation?

What conclusions can you make about the re-victimization : What conclusions can you make about the re-victimization of women who report assault and the possible reluctance that some of them feel in reporting assault

User Account

All Pages