Determination of profit on sale
April 12, 2015 | 35,00 EUR | answered by StB Patrick Färber
Dear Sir or Madam,
I ceased my small business as a disc jockey in August 2014. My taxable income for the year 2014 is €2,821. I sold DJ equipment (such as speakers, amplifiers, etc.) for a total of €3,870. I transferred assets worth €2,200 into my personal property.
Shortly after closing my business, I informed the tax office of the proceeds, personal withdrawals, and a provisional capital gain of €5,770.
I have now realized that this profit is incorrect and that I have therefore provided the tax office with a higher amount than necessary on a provisional basis.
As I now want to submit my tax return to the tax office, I do not know what to declare as the capital gain.
The DJ equipment was sold below cost price, so would the profit be €0 or am I mistaken?
Should I declare the correct profit in the tax return, or even the provisional but incorrect profit? Would I then have to expect a tax repayment?
Do I have to send the tax office a profit determination or balance sheet of the sale along with the tax return?
Please let me know the best course of action!
Thank you!
Dear inquirer,
By closing your commercial sole proprietorship, you are indeed realizing a capital gain, which results from the difference between the market values and the book values of the assets in your business assets at the time of closure.
The preliminary, purely informative communication of a closure gain would not have been necessary at this time and does not bind you for your tax return that you are now submitting.
If you have probably determined your profit in the form of a profit and loss statement before, unfortunately, the closure of the business forces you to prepare a closure balance sheet, that is, to prepare a balance sheet only for the purpose of closing the business. There is a predefined method for transitioning from a profit and loss statement to balance sheet accounting. I recommend consulting a tax advisor for this (try to agree on a flat fee).
So, with the income tax return (here the attachment G) you will also submit a final balance sheet in which you determine the transition profit or the final profit, regardless of what you had determined before. It is then advisable to write a sentence stating that the profit previously mentioned was incorrect, nothing more.
You must determine the "market values", that is, the market values of the sold and transferred assets in the business assets, and compare them with the book values in your profit and loss statement, as you should also keep an asset register even with a profit and loss statement if you have depreciated the acquired equipment over a several-year useful life. If the book values are practically 0 EUR and you have sold these assets for x EUR, then a capital gain of x EUR (x EUR - 0 EUR) is generated. The purchase price itself is less relevant here. Your original calculation may not have been so wrong after all!
Furthermore, it is the case that with a taxable income of only EUR 2,821.00 and a possible closure gain of EUR 5,770.00, you are just above the basic allowance of approximately EUR 8,300.00 (for single assessment), so the tax impact is manageable and negligible.
I hope I was able to help you further!
Best regards,
Patrick Färber, Tax Advisor
