My prospective client contacted me last year, was buying an ongoing business and wanted me to handle the tax return going forward. Although I had suggested the client sit down with me before wrapping it all up so we could eye ball things, he went ahead and closed on 12/31/21. One thing i had asked him before all this, was he buying the business or the assets and he assurred me the assets. Fast fwd, he called me today upset, the accountant for the seller has the 2021 return ready and wants my client to come sign it....sinking feeling on my end. Sure enough, client sends me a copy of the sales agreement and he bought
"all of their membership interests in the Company and all other rights, title and interest in and to the Company and its assets of every kind, nature and description, tangible and intangible, real, personal and mixed, wherever located"
im no lawyer but to me it sounds like he bought the llc, not the assets. So a couple of questions:
1)how screwed is he lol. I was always of the understanding its better for the buyer usually to buy assets not stock or llc interests. Doesnt this mean everything he spent buying it goes to cost basis now, instead of depreciable items like equip, goodwill, etc. Or can he allocate out of the sales price so much for stock and so much for capital assets? Would a 8594 still need to be done?
2) does he have to sign the return? doesnt that make him liable at least on the face of it, for the 2021 tax return?
3) by doing this, hasnt he just assumed all the LLC's problems....back payroll taxes, etc etc?
hopefully this isnt as bad as im thinking it is?